BoJ leaves rates unchanged as Japanese economy shows signs of slipping

Claus Vistesen has doubts on the sustainability of Japan's economic recovery.

My discourse on Japan should be well known to regular readers of this blog and it basically hinges on what now clearly seems as the folly of those who has consistently claimed Japan to be under way towards a sustainable recovery...

[I]t is hard to find the inflation in Japan... but on the back of this very low inflation enviroment I can hardly see anyone arguing with certainty that Japan has decisively escaped the claws of deflation... It seems clear to me that Japan as an economy faces structural challenges greatly influenced by the demographics of the Japanese society and any economic analysis which at least does not take this question into account is not worth anything I am sad to say.

And that was before he even read the latest economic news from Japan. From AFP/CNA:

Japan got a double dose of gloomy news on the economy with the unemployment rate rising to 4.2 percent in September from 4.1 percent in August and consumer spending falling sharply...

In a separate report, the Ministry of Internal Affairs and Communications reported that average monthly household spending slumped by a bigger than expected six percent in September compared with a year earlier, declining for the ninth straight month...

On Monday the government said industrial output declined by 0.7 percent in September from August and forecast a drop of 0.2 percent in October...

The Bank of Japan announced as expected Tuesday that it had agreed to leave its benchmark interest rate unchanged at 0.25 percent where it has stood since July...

Actually, it was more like a triple dose of bad news: The manufacturing PMI for Japan out today also didn't look very good. Reuters reports:

The NTC Research/Nomura/JMMA Purchasing Managers Index...slipped to a seasonally adjusted 54.1 from 54.8 a month earlier...

The new orders index...dipped to 53.7 in October -- above 50 for the 22nd month in a row but the lowest reading in 19 months. It was 54.3 in September.

The new export orders index edged down to 51.7 from 52.2, slipping further from the two-year high of 54.5 marked in August.

But the PMI report did point towards higher employment and inflation.

Hiring remained robust, with the employment index climbing to 55.5, the highest reading in the survey's five-year history... It was 54.7 a month earlier.

An easing of oil prices helped to trigger a sharp fall in the input prices index to 66.3 from 70.6.

At the other end of the production line, the output prices index jumped to a survey-high 52.5 from 51.2, giving a boost to inflation expectations after tepid consumer prices data late last week.