Feb 27, 3:31 AM EST

Japan economic data signal slow recovery despite boost from lower oil prices

AP Photo
AP Photo/Eugene Hoshiko
World Video

Archery on horseback still draws crowd
Ainu Rebels reclaim cultural pride
Japanese defend whaling tradition
Japan deals with 'Minimata Disease'
Latest News
Ex-crewmember of Japanese battleship says he recognizes photos of wreckage found this week

World's oldest person happy to be turning 117, and wonders about the secret to longevity too

Japanese negotiator says trade deal with the US possible by spring, but difficulties remain

Prince William gets a close look at tsunami devastation on the last day of his visit to Japan

Britain's Prince William visits tsunami-hit Japan in humanitarian effort evocative of Diana

Buy AP Photo Reprints
A district summary of the Beige Book
Measuring economic stress by county nationwide
Mall malaise: shoppers browse, but don't buy
Unemployment by the numbers
Family struggles with father's unemployment
Saying an affordable goodbye
Hard times hit small car dealer
Latest Economic News
Why the 5.5 percent unemployment rate, a 7-year low, doesn't look as good as it used to

February hiring brought more jobs for US teens and college graduates

Strong hiring by restaurants, construction firms and business services point to growth ahead

Russia imports down by more than a third in Jan, Feb amid fall in ruble

Egypt to present some 50 projects valued at $35 billion during major investment conference

Bank of England keeps interest rates steady and refrains from pumping money into the economy

China lowers economic growth target, promises to open more industries to foreign investment

German factory orders show unexpectedly large fall in January, led by lower eurozone demand

Hotels, restaurants and wholesalers expand as consumer spending lifts US economy

AP survey: Cheap oil and lower interest rates are brightening outlook for global economy

Greece's Debt Threatens to Spread
State budget
gaps map
Auto industry problems trickle down, punish Tennessee county
Women give old Derby hats a makeover in tough economy
S.C. town deals with highest unemployment in South
How mortgages were bundled and sold as securities
Tracking the $700 billion financial bailout
Tracking the year's job losses
State-by-state foreclosures since 2007
Credit crisis explained
Presidents and their economic legacies
Lexicon of the financial crisis
Americans' addiction to debt

TOKYO (AP) -- Japanese factories churned out more machinery and electronic devices in January as export shipments rose, but lower energy costs due to cheaper crude oil failed to provide a boost to consumer spending.

Weak retail sales and a cooling of already slow inflation underscored the fragility of the recovery of the world's third-largest economy. It also raised the potential for further monetary stimulus from the central bank.

Core inflation, excluding volatile food prices, was 2.2 percent, compared with 2.5 percent the month before and the lowest in 10 months. Excluding energy costs and food, the consumer price index rose 2.1 percent, level with the previous two months.

The inflation rate is overstated by a 3 percentage point increase in the national sales tax, to 8 percent from 5 percent, last April. The tax hike snatched the wind from the sails of the recovery Prime Minister Shinzo Abe has sought to nurture by massive monetary and fiscal stimulus.

Excluding the effect from the sales tax, the inflation rate was only 0.2 percent, Bank of Japan Gov. Haruhiko Kuroda said in a speech Friday.

The central bank is pumping trillions of yen (tens of billions of dollars) a month into the economy, seeking to vanquish deflation that discouraged investment and spending over the past two decades, aiming at an inflation rate of 2 percent.

Kuroda, the central bank governor, likened the 2 percent target to the velocity needed for a spaceship to escape the earth's gravitational pull.

"Reaching orbit at an altitude of 1 percent ... is not enough," he said. "This is because satellites at low altitude can be pulled back by gravity."

But he said the central bank would not adjust its policy based just on crude oil prices, which fell about 60 percent between December and January but have since recovered slightly.

The economy briefly fell back into recession after the sales tax hike but grew at a 2.2 percent annualized rate in October-December, helped by a surge in exports of machinery and electronics components, whose output rose in January.

Manufacturing output rose 4 percent from the month before, exceeding economists' forecasts, but was 2.6 percent lower than a year earlier.

Unemployment rose to 3.6 percent in January from 3.4 percent the month before.

Sustained growth in industrial production will depend on both export and domestic demand, said Harumi Taguchi, an economist with HIS.

"Production growth has remained lower that industry's outlooks due to weaker-than-expected demand and inventory levels are still high relative to longer-term trends," she wrote in a commentary.

Incomes have lagged behind inflation, sapping consumer demand and in turn corporate investment. Household spending fell by 0.3 percent in January from the month before and by 5.1 percent from a year earlier, suggesting the recovery in private spending remains sluggish.

As Japan begins annual "shunto" spring labor talks, Abe and other officials are pushing companies to raise wages to help support the recovery.

Many Japanese corporations have racked up record profits thanks to a weak yen, which inflates the value of overseas earnings when they are brought back to Japan. But based pay increases have been meager, and mostly confined to big companies, which employ a minority of Japanese workers.

The small and medium-sized companies that employ nearly three-quarters of all Japanese workers have been squeezed by rising costs and are less able to afford paying higher wages.


Follow Elaine Kurtenbach: www.twitter.com/ekurtenbach

© 2015 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Learn more about our Privacy Policy and Terms of Use.