Japan economic data boost PM Shinzo Abe ahead of election

[TOKYO] A raft of broadly positive economic data gave Japan's Prime Minister Shinzo Abe a boost on Friday, as he kicked off an election campaign in which the health of the world's third-biggest economy will play a major role.

Factory output grew more than expected while household spending - seen as key for Japan's exit from years of deflation - edged up and the unemployment rate sat at a more than two-decade low.

Japan's industrial production growth came in at 2.1 per cent in August, the latest evidence of an economic recovery, capping off six straight quarters of gains in the April-June period - the longest winning streak in over a decade.

The country's prospects have recently improved with investments linked to the Tokyo 2020 Olympics giving the economy a shot in the arm.

"On the whole, the data show the Japanese economy is on a healthy path" to recovery, said chief economist Yoshiki Shinke at Dai-ichi Life Research Institute, adding that the latest factory output figure was "especially good".

UBS economist James Malcolm added: "In short, things are on track."

Mr Abe stunned Japan this week with a surprise call for a snap election, seeking to capitalise on a weak opposition and a boost in the polls, as voters welcome his hawkish policy toward neighbouring North Korea which has launched missiles over Japan.

The prime minister, who dissolved parliament on Thursday, claimed that his government "put an end" to Japan's decades-long economic slump after he took office in late 2012 in a landslide election victory.

He rose to power on a mission to kickstart Japan's once-booming economy with a policy blitz known as Abenomics, a combination of big government spending, ultra-loose monetary policy and structural reforms.

But while it fattened corporate profits and sent the stock market higher, it has failed in the goal of shrugging off the deflation that has plagued Japan for years and held back growth.

Mr Abe now faces an unexpected and formidable challenge from popular Tokyo governor Yuriko Koike, who stole his limelight with her newly-launched Party of Hope.

As her party attracts an influx of lawmakers from a wide range of ideological backgrounds, Ms Koike said the pace of much-needed reforms under Mr Abe's government is too slow, and suggested a planned sales tax hike in October 2019 would kill Japan's fragile economic recovery.

However, the inflation data was not such good news for Abenomics.

After stripping out volatile prices for fresh food, inflation was at 0.7 per cent, according to the Internal Affairs Ministry - the eighth straight month of price rises and the highest in over two years.

But that is still nowhere near the Bank of Japan's 2 per cent target, despite years of record monetary easing by the Bank of Japan.

Also on Friday, household spending in August edged up 0.6 per cent from a year earlier, slightly off market expectations of a 0.9 per cent rise but the first gain in two months.

Spending is seen as another key to the exit from deflation, as consumers tend to delay making purchases in an environment in which inflation is low or prices are falling.

The unemployment rate stood at 2.8 per cent.

REUTERS