1. Skip to content
  2. Skip to main menu
  3. Skip to more DW sites

Japan economy picks up

January 30, 2015

Japan's industrial output rose in December, suggesting the world's third largest economy may be climbing out of recession. But Tokyo's attempt to overcome deflation with cheap central bank money appears to be failing.

https://p.dw.com/p/1ETHE
Japan Wirtschaft Nationalbank in Tokio mit Flagge
Image: Reuters

Data released by the Japanese government on Friday showed manufacturing output increasing 0.3 percent year-on-year in December, and 1 percent compared with the previous month.

The unemployment rate for the month edged down to 3.4 percent from 3.5 percent in November, hitting its lowest level since the middle of 1997.

The data suggest that the world's third largest economy may have grown out of recession in the fourth quarter of 2014, following two consecutive quarters of contraction earlier in the year. New growth figures will be released on Februar 16.

Problems persist

Despite the good news, Japan was still grappling with the twin problems of sluggish consumer demand and low inflation in December.

Household spending dropped 3.4 percent during the month from a year earlier as consumers continued to hold on to their cash in the wake of a 3-percent increase in sales tax in April. Wages were also largely stagnant throughout 2014.

In addition, Japan's rate of inflation remained well below the government's target of 2 percent. When the impact of the sales tax hike is excluded from December's inflation rate, prices rose just 0.5 percent in the month, moderating from 0.7 percent in November.

Prime Minister Shinzo Abe has made pushing prices higher the main priority of his economic policy aimed at ending years of deflation with low investment and stymied growth.

Under a strategy dubbed "Abenomics" the country's central bank embarked on a course of ultra-loose monetary policy, injecting trillions of yen into the financial system each month in the hope of fueling growth. As a result, Japan's currency, the yen, plumbed historic lows, while the country's debt soared to become the biggest in the industrialized world.

Economists believe that the central bank will have to expand its already extraordinary level of monetary stimulus to boost inflation as upward price pressures from wages and imports have so far failed to materialize.

uhe/ng (AFP, AP, dpa)