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Japan experienced deflation for the tenth straight month in December, while the nation's unemployment rate edged down, according to official data released Friday.
Japan's core consumer prices dropped 1.3% year-on-year in December compared to the 1.7% fall in the preceding month, the Ministry of Internal Affairs and Communications reported. The decline was less severe than the 1.7% decline expected by economists. The annual rate of deflation has now decelerated for the fourth straight month.
Month-on-month, the core CPI, which excludes fresh food from the price basket, dropped a seaonally adjusted 0.1% in December, reversing the 0.1% increase in November.
December's CPI results should keep up the pressure on the Bank of Japan, which has been in a running feud with the government on how to tackle deflation. The central bank has pledged to overcome deflation and said that it "would not tolerate" annual prices at, or below, zero. The bank promised to keep interest rates low earlier this week, but did not specify how it planned to combat deflation.
Meanwhile, core consumer prices in the Tokyo region for January, a good indicator of future movements in the nationwide price index, dropped 2% from a year earlier - faster than the 1.9% decline in the previous month. Economists were looking for a 2.1% fall.
On a monthly basis, the Tokyo core CPI dropped a seasonally adjusted 0.2% in January, adding to the 0.1% slide in the preceding month.
The Ministry of Internal Affairs and Communications also reported that the unemployment rate fell in December, confounding forecasts. The unemployment rate stood at a seasonally adjusted 5.1% in December, down from 5.2% in the previous month. Economists had expected the jobless rate to nudge up to 5.3%.
The unemployment rate was at 5.3% among males and 5% among females. The total number of unemployed persons declined to 3.39 million from 3.42 million, while on the other hand, the number of employed persons increased to 62.60 million from 62.47 million.
Also, household spending in real terms was up 2.1% annually in December, topping forecasts for a 1.6% annual increase after adding 2.2% a month earlier.
Spending on transportation & communication showed the biggest increase, up 10.8%, while on the other hand, housing expenditure registered the biggest decline, down 12.1%.
A separate report also showed that Japan's industry sector continued to expand in December, although the pace of growth slowed. The Ministry of Economy, Trade and Industry announced that industrial production climbed a seasonally adjusted 2.2% in December compared to the previous month - the tenth straight monthly increase. This was below analysts' expectations for 2.5% growth following the revised 2.6% expansion in November.
Industries that mainly contributed to the increase were electronic parts & devices, general machinery and others, the ministry said. Commodities that mainly contributed to the increase were electronic & electric toys, analytical instruments and reaction vessels.
On an annual basis, output was up 5.3% - again missing forecasts for a 5.7% increase after the 4.2% contraction in the previous month.
Meanwhile, survey data from Markit Economics showed that the Japan Nomura / JMMA Manufacturing Purchasing Managers' Index - a key indicator of the health of the manufacturing sector - stood at a seasonally adjusted 52.5 in January, down from 53.8 in the previous month. A reading above 50 indicates expansion, while one below 50 suggests contraction.
Manufacturing output reported growth for the eighth straight month in January, with respondents attributing the rise in output to a greater inflow of new orders. New order levels were up for the seventh successive month, although the pace of growth was the slowest in the sequence.
Employment levels in the manufacturing sector fell further in January, albeit at only a marinal rate. Panelits cited restructuring efforts for cutting staff levels.
Following the release of the reports, the Japanese yen edged slightly lower against its major opponents. The yen was quoted at 85.32 against the franc, 125.33 against the euro, 144.78 against the pound and 89.79 against the U.S. dollar.
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