Japan deflation persists, industrial output falls

Thursday, May 30th, 2013 | Finance News

TOKYO (AP) — Japan's consumer price index fell 0.4 percent in April while industrial production also fell from a year earlier, despite slight gains from the month before, the government reported Friday.

The data offer scant evidence of a rebound, though officials say the economy is on the cusp of a recovery and should show stronger gains by midyear.

Industrial production fell 2.3 percent from a year earlier though it was up a seasonally adjusted 1.7 percent from the month before. The strongest gains were in autos and other transport equipment and in electronic components and devices, according to the Ministry of Economy, Industry and Trade.

Despite recent turmoil in financial markets, Prime Minister Shinzo Abe has vowed to persist in aggressive monetary easing and stimulus spending aimed at helping Japan break out of deflation, or falling prices, and end two decades of stagnation.

"No action, no growth," he declared to a group of economic experts gathered this week in Tokyo to assess his "Abenomics" policies.

Japan's benchmark Nikkei 225 stock index was trading 2.1 percent higher early Friday after tumbling 5.2 percent the day before, as investors responded to retreats in other major markets.

Abe characterized recent market gyrations as "routine financial phenomena."

Though the Nikkei remains around 30 percent higher for the year, boosted by optimism over the Bank of Japan's unprecedented monetary easing, it's down 13 percent from its peak on May 22, reflecting doubt over whether the government's economic strategy can extricate the country from years of economic malaise.

The prospect of more yen in circulation weighed on the currency, which has fallen sharply to the relief of the country's exporters. It also is pushing up prices for imported crude oil and other commodities, a factor expected to help the central bank eventually reach its target of a 2 percent pace of inflation within the next two years.