Japan’s economy took baby steps forward in December as unemployment eased and factory output rose.
It could not, however, shake off a troubling combination of falling prices and wages that only worsened during the month and threatens to hamstring recovery.
The government released a slew of data Friday that offered both hope and uncertainty for the world’s second biggest economy. While Japan appears unlikely to fall into recession again – as some have feared – it faces a murky future under entrenched deflation.
“The bottom line is that a double dip is unlikely in Japan,” said Kyohei Morita, chief economist at Barclays Capital in Tokyo. “That’s mainly because corporate activity is not that weak. Exports have been rising, which has resulted a pickup of production activity, which we hope will translate into a pickup in capex this year.”
Industrial production climbed 2.2 percent in December from the previous month, powered by a pickup in exports. The result just missed Kyodo News agency’s forecast for 2.3 percent growth in its survey of economists.
The trade ministry expects factory production to rise 1.3 percent in January and 0.3 percent in February.
Earlier this week, government figures showed that robust Asian demand in December fueled the first expansion in Japan’s exports in 15 months.
There was also a small improvement on the jobs front. The nationwide unemployment rate fell to 5.1 percent in December – better than 5.2 percent in November, though still high by Japanese standards.
The average ratio of job offers to job seekers stood at 0.46, a tad higher than 0.45 a month earlier. The figure means there were 46 offers for every 100 job seekers.
Household spending posted a solid rise in December, up 2.1 percent from a year earlier. The figure represents a key indicator of private consumption, which accounts for about 60 percent of Japan’s economy.
Despite the better jobs numbers, reaction from officials and analysts was far from jubilant.
“The rate improved slightly,” Prime Minister Yukio Hatoyama told reporters, according to Kyodo. “But it is far from giving grounds for optimism.”