TOKYO (Thomson Financial) - Japan's economy is in weak shape and conditions are likely to continue until around the second quarter, Morgan Stanley chief economist Takehiro Sato said on Friday.
'The poor February data released today reflects the current economic situation,' said Sato.
'We are looking at both the economies in the US and Japan having already entered a mini-recession and it is expected to continue until around the April-June quarter,' he said.
Japan's core consumer price index rose 1.0 percent in February from a year earlier, the fastest rise in nearly 10 years, due to higher prices of gasoline and food.
It was the fifth straight month of increase and beat the market's forecast.
Gasoline prices rose 18.2 percent in February, the eighth increase in the past nine months, pushing up the overall CPI by 0.42 percentage point.
A recent survey by the Oil Information Center found that the average price of regular gasoline was 153 yen per liter on March 10, near its all-time high of 156 yen on December 10.
Sato said that Japan's core CPI is expected to stay above 1.0 percent for a while as food prices are expected to further push up the index, with oil prices expected to stay higher.
'The core CPI is unlikely to accelerate its rising pace but stay at around 1.1 percent. It is depends on oil prices whether the index will calm down,' Sato said.
Other government data showed that Japan's unemployment rate rose to 3.9 percent in February from 3.8 percent in the previous month, as some companies trimmed their staff amid more difficult business conditions.
Economists had expected the jobless rate to stay at 3.8 percent last month, according to the median estimate of Thomson/IFR Markets.
The male jobless rate rose to 4.0 percent from 3.9 percent, while the female unemployment rate increased to 3.8 percent from 3.7 percent.
'The pressure on the employment adjustment appeared in weak segments such as small- and medium-sized companies, part-timers and female workers. The jobless rate is expected to worsen to around 4.0 percent in the March data,' Sato said.
'Small- and medium-sized companies have labor shortages but they are unable to hire new employees because higher oil prices and raw materials are squeezing their profits and they are unable to pass them on to sales prices to large corporations,' he said.
Separately, government data showed that spending by Japanese households averaged 275,827 yen in February, unchanged from a year earlier.
But the overall income of households dropped 0.1 percent, with the income of household heads down 0.1 percent. Disposable income fell 1.1 percent.
'Corporations, especially small- and medium-sized companies, are unable to raise employee wages while prices are on the rise, so it is natural that consumers refrain from spending,' Sato said.
(1 US dollar = 99.36 yen)
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