TOKYO (AP) – Japan’s vital signs remained weak in July as wages fell further and household spending dropped, signaling continued weakness in the world’s third-largest economy.
Data released Friday showed the inflation rate was unchanged from the previous month. The core price consumer index that excludes volatile fresh food prices rose 3.3 percent in July, the same as a month earlier. Much of the increase stems from a 2 percentage point increase in Japan’s sales tax in April, which has since sapped much of the steam from the country’s economic recovery.
Under Prime Minister Shinzo Abe, the government and central bank have sought to spur inflation on the premise that it would goad businesses and consumers into spending more instead of saving money in anticipation the Japan’s deflationary spiral will guarantee lower prices in the future.
That strategy, dubbed “Abenomics,” has made some headway in ending the long spell of deflation that slowed growth for much of the past two decades. But headline inflation remains below the official target of 2 percent, excluding the boost from the tax hike, and so far there are only scant signs of the desired “virtuous cycle” of higher corporate spending to sustain growth in the long term.
Real incomes fell 6.2 percent in July from a year earlier and the unemployment rate edged higher to 3.8 percent from 3.7 percent in June. Softness in the labor market would counter any moves toward higher wages that might help spur more consumer demand.