Japan Unemployment Falls and Retail Sales Surge Supporting 'Abenomics'

Japanese economic data, including household spending, retail sales and unemployment, released on 29 October suggest Prime Minister Abe Shinzo's strategies are moving the country in the right direction.

Japanese retail sales rose 3.1% from a year earlier in September, according to official data. That compares to a 1.1% increase in August and exceeds analysts' expectations of 1.9% growth. Retail sales rose 1.8% from the previous month.

The higher retail sales have been boosted by increased household spending for the month. Overall household spending increased by 3.7% year over year in September, compared to a 1.6% decline in August. Analysts expected an increase of 0.7% for September.

Meanwhile, Japan's jobless rate fell to 4.0% in September from 4.1% in August. The latest rate matches analysts' expectations.

The spending and unemployment figures add to the success of Prime Minister Shinzo Abe, as he tries to pull Japan out of 15-year long deflation.

Higher retail sales and consumer spending indicate better incomes of people, which would help end deflation.

Recent consumer price data from the country showed that Japan is on track to meet its inflation target of 2%. In August, the consumer price index (CPI) inflation rose 0.9% year-on-year, the fastest pace since November 2008.

Success of Abenomics

Having taken office at the end of 2012, Abe has advocated massive fiscal and monetary easing measures to end deflation and boost economic growth.

He and the Bank of Japan led by Harushiko Kuroda unveiled a series of stimulus measures that attracted global attention due to its large sizes. The three-arrow strategy dubbed "Abenomics" involves aggressive monetary policy, flexible fiscal policies, and growth reforms.

While the measures contributed to economic growth in terms of industrial output, employment, inflation and workers' income, some analysts argued that the benefits of Abenomics may not be sustainable and will not prompt more corporate investment and wages in the absence of structural reforms such as tax cuts and labour reforms.

The International Monetary Fund has earlier applauded "Abenomics" strategy, saying it has helped the economy to counteract capital outflows due to fears about the US Federal Reserve tapering.

IMF Asia-Pacific Department Director Anoop Singh said the strategy had resulted in "significant capital inflows into Japanese bonds and equity markets, mainly driven by foreign investors."