Japan economy picks up as factory output rises 2% – Oman Tribune

The news will also provide an extra fillip to Prime Minister Shinzo Abe as his party faces parliamentary elections next month that are widely expected to see a resounding victory for him, solidifying his power base.

Friday’s figures showed industrial production jumped 2 per cent in May from a month earlier and add to an improving trade picture as exports to the US and China surge on the back of a weaker yen. The rise was the best since December 2011 and beat expectations of a 0.2 per cent uptick.

The news was also tempered by separate figures on Friday that showed consumer prices flat in May. While there was a modest increase in the metropolitan Tokyo area and the results were better than a fall in the previous month, they showed the hard work that still needs to be done to end years of stubborn deflation that has hindered the economy.

Household spending also remained weak, falling 1.6 per cent from a year earlier.

Since taking office in December, Abe has launched a huge round of monetary easing, big fiscal spending and a series of reforms aimed at freeing up businesses — a policy that has been dubbed “Abenomics”.

Japan’s sleep-walking economy has been given a jolt by the moves, with the yen shedding some of its export-sapping strength and the stock market surging. A weak yen makes Japanese exporters more competitive overseas and boosts the value of repatriated foreign income.

In afternoon, forex trade the yen slipped to 98.9 against the dollar from 98.43 late Thursday in New York. The Nikkei stock index was also 3.55 per cent higher.

Japanese manufacturers’ sentiment turned positive in the three months to June for the first time in nearly two years, a closely-watched central bank survey is likely to show on Monday in a sign recent market turbulence has yet to hurt the feel-good mood created by the government’s reflationary policies.

The BoJ’s “tankan” survey will likely show the headline index for big manufacturers’ sentiment improved 11 points from three months ago to plus 3, according to a Reuters poll.

That would be the second straight quarter of improvement and the first positive reading – which means optimists outnumbered pessimists – since the survey of September 2011, and vindication of Prime Minister Shinzo Abe’s “Abenomics” policy of aggressive monetary stimulus and fiscal spending.

Service-sector sentiment also likely brightened as consumers spent more, with the index for big non-manufacturing companies likely to have risen 5 points to plus 11, the Reuters poll showed. A positive reading will bode well for the central bank, keen to end grinding deflation that has haunted Japan for 15 years and achieve its 2 per cent inflation target in roughly two years through aggressive monetary stimulus.