Japan household spending up after 15 months of decline

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Japan’s household spending rose in June after 15 months of decline, official data showed Friday, positive news in the government’s long battle to make a clean break from deflation and stoke economic growth.

The upturn is a boost for Prime Minister Shinzo Abe, who has been trying to bring back strong growth to the world’s third largest economy for more than four years but with mixed success.

Japan’s prospects have recently been improving on the back of solid exports, with investments linked to the Tokyo 2020 Olympics also giving the economy a shot in the arm.

But consumer spending has remained a concern while the Bank of Japan has struggled to lift inflation despite years of aggressive monetary easing.

Household spending in June rose 2.3 percent year-on-year, according to the internal affairs ministry, widely beating market expectations for a rise of 0.5 percent and stemming a losing streak dating back to March 2016.

Spending on housing repair and automobile purchases were major contributors, the data showed.

A separate report from the ministry showed nationwide inflation edged up 0.4 percent year-on-year, after stripping out the volatile costs of fresh food.

It was the sixth consecutive month of increase but the recent gains have largely been due to higher energy costs rather than a broad-based rise backed by stronger consumer spending.

The figure underlines the challenges still facing Tokyo’s battle to get rid of years of on-and-off deflation.

The figures fall well short of the BoJ’s 2.0 percent inflation target — seen as crucial to conquering the falling prices that are blamed for holding back the economy.

The BoJ last week once again delayed its timetable for hitting the target. It now expects to achieve the two percent objective sometime in the year to March 2020.

Officials had in 2013 originally set a two-year timeline when unveiling the bank’s massive monetary easing programme as part of Abe’s push to kickstart growth, with government spending and red-tape slashing among other measures.

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