Is Japan economy improving? CPI is the key economic indicator

Is Japan economy improving? CPI is the key economic indicator

03.28.2014

On Friday, Investors  in Japan have closely watched  different data releases , and were holding for  the country's first sales tax hike  expected to be released on the 1^st of April. 

In Fact, the  core consumer price index (CPI) rose for a ninth consecutive month in March,  to  1.3% which was according to analysts forecast and labor demand improved, all these data are showing that  the economy is making progress to tackle many years of deflation.
In addition, Retail spending rebounded, gaining 3.6 percent in February better than expectations of a 3.2 % rise. Also the jobless rate in February stood at 3.6 percent, against market expectations of 3.7 %. Accordingly, the yen recovered slightly and major yen crosses were little changed following the data. The currency was trading around 102 against the greenback and 140.4 against the euro. However, the Nikkei meanwhile opened 0.36 percent lower.

Another  positive data for the Japanese yen and confirming the Japanese economic improvement is the Labor jobs report which showed Japan's jobless rate fell to 3.6 percent in February, the lowest in more than six years.

The data surge comes ahead of a hike in the sales tax – which is expected to rise from 5% to 8 % due on Tuesday April 1^st. 

On the other hand, the Ministry of Finance data showed household spending and retail sales decreased in February, affected by snowstorms across Japan, which has kept many consumers at home, but there are already signs that sales are accelerating this month as shoppers rush to hit  a sales tax  climb  on April 1.

                                                         

Furthermore, Japan's annual export growth in February was inferior than  market expectations and a Bank of Japan policymaker warned about the outlook as the world's third-largest economy faces a sales tax hike next month that could reduce the economic activity.

Japan's CPI is expected to get more attention after the country will rise  its consumption tax in April, which may affect  consumer spending and raise speculation of further monetary easing by the Bank of Japan (BoJ). Also Analysts expect the BOJ to ease policy further in order to stimulate growth and accelerate inflation.