Japan economy shows signs of stagnation

PanARMENIAN.Net - Japan's economy has shown signs of stagnation and some weakness as households spent less and factory output stayed flat in July, BBC News reports.

Official data released on Friday, Aug 29, also showed consumer inflation stayed unmoved at 3.3% from the month before.

Japan raised its sales tax from 5% to 8% in April so analysts said "real" inflation for July was actually 1.3%.

The economy, which is the world's third-largest, suffered from deflation for almost two decades. The central bank's current target for the inflation rate is 2%.

Since coming to power in 2012, Japan's Prime Minister Shinzo Abe has seen his various reforms aimed at reviving the economy provide some relief to the country's deflation concerns.

Abe's reforms, dubbed 'Abenomics', have been aimed at boosting inflation, among other targets, in the hope that consumers would spend instead of save.

Private consumption makes up some 60% of Japan's economic activity and deflation trends in the country had seen consumers hold onto their money in the hope of even lower prices later on.

Retail sales in July showed some small hope, rising by 0.5% from a year earlier, after a fall of 0.6% in June.

Overall however April's controversial sales tax hike may have had an adverse impact on the economy, at least in the short term, hurting the nation's purchasing power.

In the April-to-June period, official data showed Japan's economy had contracted by 1.7%, compared to the earlier quarter.

And on an annualised basis, data showed it had shrunk by 6.8% - though the numbers followed large gains in the previous quarter.