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Wednesday, 31st July 2013
In Business In Japan,

Japan announces fall in industrial output and household spending

Japan's industrial output and household spending have both fallen, according to new figures.

The weaker-than-expected economic data underlines the challenges which the government faces as it continues to try and revive the country's economy.

In June industrial output fell by 3.3 per cent when compared with the previous month, while year-on-year this reduction was 4.8 per cent. In terms of household spending, this dropped by 0.4 per cent from 12 months previously and reversed a prediction from analysts who had forecast a one per cent rise.

Speaking to the BBC, Masaaki Kanno, Japan chief economist with JP Morgan Securities, said that the figures represented a "minor blip" and the overall trend is that of a recovery in the country's economy.

This rebounding has been helped by a host of aggressive measures from prime minister Shinzo Abe's government, and it has been reported that ending the deflationary cycle is the key to reviving the economy in the country.

Yoshiki Shinke, chief economist at Dai-Ichi Research Institute, added: "Although June data for factory output was weak, manufacturers' forecasts for July are strong. I think there is no change in the trend that production is expected to stay on a steady recovery as June trade data was good, benefits from the yen's weakness are appearing and domestic demand is solid."

One of the key factors in Japan will be whether or not companies begin to invest further and raise wages, which would help to spur on consumer demand.

Marcel Thieliant, an economist from Capital Economics, stated: "Looking ahead, there are a number of reasons to doubt that the recent strong run of consumer spending can continue,” he said.

“With inflation now rising, income growth has to pick up as well for households to maintain their spending power,” he said. “The overwhelming majority of households views inflation as negative, and may rein in spending in response."

Written by Mark Smith