Sharp drop in Japan’s consumption, unemployment hits a 20-year low

The household consumption expenditures in Japan unexpectedly dropped by 2.4% in October, disappointing analysts who had predicted zero annual change after falling 0.4 % the previous month.

The average of monthly consumption expenditures per household for October 2015 was 282,401 yen, down 2.1% in nominal terms and down 2.4% in real terms from the previous year.

The average of monthly income per household stood at 485,330 yen, down 0.6% in nominal terms and down 0.9% in real terms from the previous year.

The average of consumption expenditures per household was 309,761 yen, down 2.0% in nominal terms and down 2.3% in real terms from the previous year.

The data reinforce the concerns about the economy, which technically is in recession after two consecutive quarters of contraction in gross domestic product.

The question now is whether the central bank will react with further monetary stumulus?
Expectations for further easing of monetary policy find support in the inflation data, that was released today.

Core consumer price index, which excludes fresh food but not the cost of energy keeps the annual pace of decline of 0.1%. We must point out that the result was influenced mainly by the fall in oil prices - a trend that regulators would probably qualify as temporary.

Among the reports published in Japan on Friday, there is good news. Unemployment rate unexpectedly fell to 20-year low of 3.1% compared to forecasts the index to remain stable at 3.4 per cent.

The labor market should be a bright spot for Japan’s economy,which suffered a mid-year recession. Yet while unemployment is low and jobs are plentiful, this hasn’t translated into strong wage gains that could help spur inflation. Kuroda has said wage gains have been “somewhat slow” considering strong corporate profits and the solid labor market.