A decline in Japan’s household spending coupled with rise in unemployment once again triggered speculations that whether interest rates will be raised soon. According to the latest figure, household spending dropped by 1.9 percent in December last year, which market the 12th consecutive decline. This trend has fueled the fear that people are unwilling to spend due to slow wage growth. The jobless rate rose from 4 percent to 4.1 percent.
On the other hand, the government is riding high on the economic performance and is sure that prolonged economic recovery is still continuing and is ion right direction. The government has said that a decline in consumer spending is a result of the mild weather. In the mean time, domestic consumption in Japan has stayed feeble, triggering government’s worries about choking the economic recovery should they decide to raise rates.
However, Japanese authorities are scrutinizing all economic data for clues to ascertain that the Bank of Japan will raise the interest rates. The current interest rates stand at 0.25 percent. Clearly, the Japanese government is favoring low rates in order to keep economic recovery in the right direction. However, European nations are planning to warn the Japanese government for distorting the value of the already weak yen, which has significant impact on international trade.
The Japanese economy still can not be portrayed weak at the moment as its industrial production grew at 0.7 percent in December against the expectations of 0.2 percent rise. On the other hand, Consumer Price Index rose by 0.1 percent lower than expected. However, the CPI is expected to pick up in coming months.
