Japanese price rises fuel fears on growth

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Lindsay Whipp from Tokyo
JAPANESE consumer prices surged to another 10-year high in February while unemployment rose, squeezing Japanese disposable incomes and intensifying concerns that economic growth in the country is fading out.
Core consumer prices, excluding fresh food, rose a faster-than-expected 1.0 per cent from the year-earlier month, government data showed. However, prices fell 0.1 per cent after removing energy and food costs, suggesting deflation remains entrenched in the domestic economy.
Hiroko Ota, economics minister, said she was concerned rising consumer prices would hurt faltering consumer sentiment, underlining government concerns that Japan's weak economic growth may run out of steam.
"There is no pressure on the Bank of Japan to raise rates whatsoever," said Ian Bright, economist and strategist at Pali International. "Japan doesn't have any domestically-generated inflation and the growth profile of the economy has at the very least flattened out. It wouldn't take much to push it into recession if the export engine turned off."
Exports have been a major driver of growth in Japan. Strong shipments to China and other emerging countries more than offset declines to the US in February, a relief to the many economists who were expecting the impact of a slowdown in the US to hit Japan's exports hard in the first quarter.
However, the outlook for the world's second-largest economy was not helped by separate data late last month showing unemployment rose 0.1 of a percentage point to 3.9 per cent, seasonally adjusted, and the job-to-applicant ratio dropped to 97 jobs per 100 applicants from 98 in January.
The trend for employing part-time workers over full-timers also continued. Three-month moving averages for employees working less than 35 hours jumped 18.2 per cent, while for those working 35 hours or more the number dropped 5.7 per cent, according to Pali calculations.
Japan's households are faced with higher petrol and food costs while companies are unwilling or unable to raise wages, or to employ more full-time employees, as they strive to retain profits and keep prices competitive in the face of a strengthening yen.
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— FT Syndication Service