2 Positive Reports Buoy Japan’s Economic Outlook

Japan got welcome glimmers of hope today in two of the bleakest areas of its struggling economy, with a surprise increase in personal spending and a drop in the unemployment rate from a record high.

Spending by wage earners’ households climbed 3.6% in real terms in April from a year earlier, only its second rise in nine months, while joblessness slipped a notch from its February and March highs to 4.8%.

The rise in the key measure of consumer spending and the dip in the jobless rate bolstered prospects for a full recovery from Japan’s worst postwar recession.

“Not only today’s spending figures, but most indicators point to an overall improvement. Unemployment and job opportunities also improved,” said Mamoru Yamazaki, senior economist at Paribas Capital Markets.

“With consumption, the situation is stop-and-go. But the better-than-expected spending increases the chances that we’ll see a sustained recovery.”

The yen gained slightly against the dollar in early Asian trade after the data was released. Tokyo stocks showed little reaction, while the yield on the 220th 10-year government bond rose slightly to 1.6%.

In April, spending by wage earners’ households rose to an average $3,427, the Management and Coordination Agency said. This defied a median forecast of a 1.1% fall in a Reuters survey of 12 economists, all of whom predicted a decline.

Significantly for monetary policy, the agency said real incomes of wage earners in April were unchanged from the previous year, the first time they had not declined since June 1999.

Separately, the agency said the seasonally adjusted unemployment rate was down 0.1 percentage point in April from a record 4.9%.