Japan Retail Sales August 2007

METI have just released the latest retail sales data. The yen value of both retail sales and sales at large stores actually fell from July, although total retail sales did manage to eke out a small 0.5% increase year on year, which was notable since in 9 of the previous 10 months they have actually been down even year on year.

Japan Industrial Output August 2007

Well industrial output was certainly up in Japan in August.

Japan's industrial output surged at the fastest pace in almost four years....Production rose 3.4 percent from July to a record, the Ministry of Economy, Trade and Industry said in Tokyo today.

As I say, the August numbers certainly shot up. The question is what to make of this reading. Claus is preparing a fuller analysis even as I post this.

Japan Employment and Unemployment August 2007

Well, as reported in the Financial Times today, Japanese unemployment crept up slightly last month:

Japan’s jobless rate rose for the first time in 11 months as more people sought work, underlining concerns about the slow pace at which economic growth has translated into higher wages.

The unemployment rate rose 0.2 point to 3.8 per cent in August, while the job to job-seekers ratio deteriorated slightly from 1.07 to 1.06. The unemployment rate for women rose from 3.3 per cent to 3.7 per cent, according to official figures released on Friday.

Here's the monthly chart:




Also the number of persons employed dropped back slightly. As can be seen from the chart this seems to have peaked in May.



A much fuller analysis of the recent dynamics of the Japanese labour market can be found in this post.

Raising Consumption Taxes To Finance Pensions?

According to reuters today:

Japan may finance its basic pension scheme through a rise in its consumption tax, a senior official from the ruling party said on Thursday.

"We are not going to resort to using the sales tax from the beginning, but in the end I think we will conclude that it's best to finance the pension scheme with the sales tax," said Sadakazu Tanigaki, the Liberal Democratic Party's policy chief.

Tanigaki has said in the past that Japan will need to raise its consumption tax from the current 5 percent to address the problem of its huge public debt.

Japan is an ageing society with an already congenitally weak domestic consumption situation. Raising consumer taxes has one very well known impact on demand (as in elementary economics well known): it reduces it. Japan needs to think very carefully indeed before going down this road. Claus wrote a good analysis of what the likely consequences would be of raising Germany's VAT consumption tax by three percentage points last January to pay for the health system. At the time such arguments were dismissed, but as we can now see, the chickens are coming home to roost. The German comparison is important since, due to rapid population ageing, the German economy is dependent on exports in just the same way the Japanese one is.