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TOKYO, March 11 (Reuters) – Japanese household spending rose in January but business sentiment deteriorated in the first quarter as rising raw material costs weighed on corporate margins, leaving the country’s resource-poor economy facing hard work.
The results increase pressure on policymakers to step up fiscal stimulus to support Japan’s economy, which is likely to have stalled in the current quarter and faces new risks from the surge. fuel prices blamed on the Ukrainian crisis.
“While the number of infections is gradually declining, consumption of services has not fully recovered. This increases the risks of a contraction in the Japanese economy in January-March,” said Takeshi Minami, chief economist at Norinchukin Research. Institute.
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“Households can keep their purse strings tight given soaring energy costs and rising prices for basic necessities.”
Household spending rose 6.9% in January from a year earlier, government data showed on Friday, more than the median market forecast for a gain of 3.6%. It followed a 0.2% decline in December.
The increase was largely due to the base effect of a recession in January last year, when the COVID-19 state of emergency restrictions were imposed.
Looser restrictions to deal with a spike in new cases of Omicron coronavirus variants remain in place in parts of Japan, weighing on household spending. Read more
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A separate government survey showed Japanese business confidence plummeted in the first quarter as sectors vulnerable to rising commodity costs, such as food and transportation, were hit.
An index measuring big business sentiment came in at -7.5% in the current quarter, down from a reading of +9.6 in the October-December period, the survey showed. It was the first negative reading in three quarters.
The mood for small and medium-sized businesses also deteriorated in the first quarter, the data showed.
Japan’s heavy dependence on imports of fuel and raw materials leaves its economy vulnerable to a rise in raw material costs, which accelerated following the Russian invasion of Ukraine in late February.
Wholesale inflation hit a record 9.3% in February and analysts expect core consumer inflation to approach the Bank of Japan’s 2% target from February. April, threatening to choke off already weak consumer and business spending.
Some lawmakers are beginning to push for another spending package to cushion the blow of rising energy costs, with an opposition party leader proposing a package of around 10 trillion yen ($86 billion) .
Finance Minister Shunichi Suzuki said on Friday that the government was not considering compiling a new stimulus package as it focuses on passing the fiscal year 2022 budget through parliament.
Japan’s economic growth likely nearly stalled or may have contracted in January-March, Reuters poll shows, as COVID-19 restrictions and supply chain disruptions hurt consumption and factory production. Read more
($1 = 116.2600 yen)
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Reporting by Kantaro Komiya; Editing by Cynthia Osterman & Shri Navaratnam
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