- Hiroaki Muto, Tokai Tokyo Research Centre
Japan's household spending went down 1.5% on a yearly basis in November for the ninth month in a row amid stagnant wages, hinting the challenge Prime Minister Shinzo Abe's government faces in reinvigorating the economy. Separate data showed that Japanese core consumer prices also posted the ninth straight month of annual declines in November, suggesting that the economy still lacks enough momentum to jump-start inflation toward the central bank's ambitious 2% target. Moreover, Tokyo officials have blamed external factors, such as falling energy prices and uncertainty related to emerging economies, for their failure to achieve a promised stated above inflation target.
In the meantime, the Japanese economy may finally be getting some relief in the form of a weaker yen. It is worth to point out that Japanese currency has dropped roughly 12% against the US dollar since the November 8 presidential election. Losses have accelerated since the Federal Reserve's decision to raise US interest rates on December 14. Moreover, the yen's weakness is predicted to continue in the new year since central banks in Washington and Tokyo continue to diverge on monetary policy.
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