Jan 29, 9:23 PM EST

Factory data shows Japan economy turning corner on recession but inflation remains subdued

AP Photo
AP Photo
World Video

Archery on horseback still draws crowd
Ainu Rebels reclaim cultural pride
Japanese defend whaling tradition
Japan deals with 'Minimata Disease'
Latest News
With deadline for possible prisoner swap past, Islamic State group silent, families in limbo

Factory data shows Japan economy turning corner on recession but inflation remains subdued

Wife of Japanese hostage makes emotional appeal for his life

News Guide: The twists and turns of Japan and Jordan's hostage crisis with the Islamic State

VOICES: Japanese share their thoughts on the Islamic State group hostage crisis

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
Factory data shows Japan economy turning corner on recession but inflation remains subdued

Fragile state of US consumer contrasts with stronger economy, studies show

German unemployment rises to 7 percent in January due to seasonal slowdown in labor market

Philippine official: Strong growth shows country is no longer 'sick man' of Asia

Russian government details how it will cut spending 10 pct in face of economic crisis

NYC economy lost about $200 million from fizzled storm, transit shutdown, expert says

Britain's economic growth rate falls at end of 2014, but remains among best in developed world

A huge Northeastern snowstorm shuts down some businesses but pumps up sales at others

France, desperately seeking jobs and growth, debates bill to free up labor rules

Germany's Ifo survey of business optimism rises for third straight month, beats expectations

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) -- Japan's industrial output edged higher in December, suggesting the world's third-largest economy may be turning the corner on a recession brought on by a hefty sales tax hike.

Data released Friday showed manufacturing output increased 0.3 percent in December from a year earlier and by 1 percent from the month before. However, inflation moderated to 2.5 percent from a year earlier, compared with 2.7 percent in November. The core consumer price index, excluding food, fell 0.2 percent from the month before.

Prime Minister Shinzo Abe has made pushing prices higher the main focus of economic policies aimed at ending years of deflation that have discouraged corporate investment and stymied growth.

Falling energy costs thanks to the plunge in oil prices is countering that trend. But lower oil prices have had a limited effect on the economy so far, since the CPI excluding both food and energy was unchanged from the previous month.

Meanwhile, Japan's jobless rate dipped to 3.4 percent from 3.5 percent the month before. But stagnant wages meant household spending dropped 3.4 percent from a year earlier.

When the impact of a 2 percentage point increase in the sales tax in April is excluded, Japan's inflation rate was well below the 2 percent target set by the government and the central bank, which is spending trillions of yen (billions of dollars) a month to buy government bonds and inject more cash into the economy.

For the "Abenomics" strategy to work, Japan's planners agree that wages must increase enough to boost consumer demand, which has stagnated as price increases have crimped household purchasing power.

"However, there is no evidence that a tighter labor market has strengthened price pressure," Marcel Thieliant of Capital Economics said in a commentary Friday. "Adjusting for the impact of the sales tax hike, prices are rising at the slowest rate since June 2013," he said.

He says the Bank of Japan will have to expand its already extraordinary level of monetary stimulus to get prices moving closer to its inflation target.


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.