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Japan inflation weakens consumer purchasing power in July

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September 1
10:12 AM 2015

Japan's economy continues to decline.  Inflation rate and household spending crawled in July.  This is according to data that was released onFriday that will possibly add pressure on the central bank to raise its barrage of monetary stimulus.  

Japan has to escape the despondency which is more than two years after Prime Minister  Shinzo Abe released an unaccustomed effort to move the country out of its actuary rut.

The inflation rate in July was 0.2% compared with 0.4% in June.  The core inflation not  including unstable prices was flat.

The increase in prices became moderate with the plunge in oil prices, but that effect is thought to have peaked this summer.  Nevertheless, inflation is still far from the official target which is 2% set by the government and central bank.

Japan's economy shrank by 1.6% in April-June, but many economists are predicting a renewed expansion  in the current quarter. 

The Bank of Japan is shelling out trillions of yen a month on asset purchases which are purposely to push inflation higher and stop years of deflation or long time of price reduction.

The concept is to make consumers and business to spend more money and boost growth.  But the spending so far that accounts for most of Japan's economic activity did not succeed to collect despite modest increases in some workers' wages.

Unemployment  bordered down to 3.3% and household incomes jump to 5.4% in real terms, due to semi-annual bonus payments.  These trends are leading economists for predicting the economy will go back to expansion after a 1.6% contraction in yearly terms in April-June.

The main Nikkei 225 stock index rose 2.8% on Friday, but it was still down more than 6% for the week.

BOJ Gov. Haruhiko Kuroda said in a speech to the Japan Society in New York this week that the bank keeps a close eye on potential risks and will "make adjustments without hesitation as necessary."

Corporate profits have suddenly increased record levels, in part due to a weakening Japanese yen means that revenues that are earned overseas buy local currency.

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