Japan's jobless rate edged higher and industrialproduction fell slightly in February as consumer prices also fell, underscoringthe fragility of the recovery of the world's third-largest economy.
The government data released Friday showed the main consumerprice index fell 0.3 percent from a year earlier as deflation continued to defythe combined efforts of the government and central bank to move toward a 2percent inflation target. However the CPI was up 0.1 percent from January'sfigure.
Unemployment rose to 4.3 percent from 4.2 percent the monthbefore, while industrial production slipped by 0.1 percent in the first declinein three months. The unemployment rate for those below the age of 35 issignificantly higher, at over 6 percent.
Japan's central bank governor, Haruhiko Kuroda, saidThursday that he believed the economy was improving after years of stagnationand would enter a moderate recovery by midyear. But he acknowledged highuncertainty because of the global economy.
Kuroda has pledged to work with Prime Minister Shinzo Abe'sgovernment in achieving the 2 percent inflation target set in January,preferably within two years, and ending years of growth-inhibiting deflation.
After taking power late last year, Abe's administrationembarked on an aggressive stimulus program of government spending, monetaryeasing and planned reforms aimed at improving Japan's competitiveness. Revisedfigures show Japan's economy likely emerged from a recession late last year,but other data has been mixed.
The government's strategy will depend on getting consumers,whose spending accounts for the lion's share of economic activity, to spendmore, and that in turn will hinge on encouraging companies to raise wages andincreasing higher. Many companies huge cash reserves after having shed debtfrom the collapse of the economic bubble over 20 years ago but are wary ofincreasing investment given the existing weak demand and the aging andshrinking of the Japanese population.
Friday's data, coupled with signs of weakening retail sales,show the scale of the challenge in restoring consumer confidence.
By boosting inflation, Japan's planners hope to persuadeconsumers to spend more now in anticipation of price increases in the future.That could prove a daunting challenge given a drop in real wages over the pasttwo decades and the weak job market, said Susumu Takahashi, head of the JapanResearch Institute and a member of a government economic advisory council.
To achieve the inflation target the government must changeexpectations, he said.
"The only way is for the deflationary way of thinkingto change. Without that it will be very hard," he said.
Speaking to lawmakers about the central bank's semiannualreport, Kuroda said prices are unlikely to rise for the next few months butafter that Japan would see some progress toward its inflation target as the economymoved toward a "moderate recovery path."
The central bank asset purchases and other strategiesadopted so far have not been sufficient to reach the inflation target, he said,reiterating his intention to manage market expectations and "make clearthat we have adopted the uncompromising stance that we will do whatever isnecessary to overcome deflation."
Kuroda was appointed to succeed former BOJ governor MasaakiShirakawa when he stepped down on March 19, three weeks before his termexpired. The parliament is expected to approve his appointment to the five-yearterm, which is due to begin April 8.
The central bank is due to hold its firstregular policy meeting under Kuroda April 3-4, though it may wait until laterin the month to embark on any significant moves, such as a boosting itspurchases of government bonds to help increase the amount of money available inthe economy and encourage more investment by the private sector.