Latest data show Japan's economy continues to slump

Japan's unemployment rate rose to its highest level in nearly two years in June, while personal spending slowed, a sign of the impact of the global economic turmoil on Japan's largest economy. In addition, other data showed domestic demand remained weak as Japanese households were reluctant to spend more amid mounting price pressures and sluggish wage growth, adding to concerns about Japan's economic outlook. Etsuko Yamashita, chief economist at Sumitomo Mitsui Banking Corp., said all the data now show Japan's economy is in decline. With corporate profits shrinking and employment significantly deteriorating, it's hard to expect consumption to pick up. Japan's Ministry of Internal Affairs and Communications (MinistryofInternalAffairsandCommunications) said on Tuesday that Japan's unemployment rate rose to 4.1% in June from 4.0% the previous month, the highest level since September 2006, after seasonal adjustment. Unemployment rose more than the 4% forecast by economists on average, and also led the government to downgrade its assessment of employment conditions, saying it must pay close attention to future trends. Japan's economy and finance minister Hiroko Ota pointed out that the deteriorating employment data underscored the current economic stagnation. Meanwhile, after adjusting for prices, overall household spending fell 1.8% in June from a year earlier, the fourth consecutive monthly decline, further confirming the weakness in the private consumption sector. Retail sales edged up 0.3% in June from a year earlier, but excluding the impact of changes in store numbers, department store and supermarket sales fell 3.9% in the month, the third straight monthly decline. Analysts warned that because the headline retail data was not adjusted for inflation, the rise was mainly due to higher food and oil prices rather than a rise in real demand. Food and beverage sales rose 3.6% and fuel sales rose 3%. Barclays (Barclays Capital) chief Japan economist Kyohei Morita said that considering the price surge this year, the sales after adjusting for the price factor should have fallen sharply. Inflation-adjusted sales fell 3.3 percent in June, an official from Japan's Ministry of Economy, Trade and Industry said. With the global economic slowdown likely to continue to threaten exports, it is unlikely that the situation for local companies will improve in the short term. Beyond that, consumer confidence, already hit by rising prices, is likely to remain subdued, analysts said. Japan's core consumer price index, which strips out fresh food prices, rose 1.9% in June from a year earlier, data released on Friday showed. If the impact of the consumption tax hike in 1997 is not taken into account, this is the peak of the year-on-year increase in the CPI since December 1992.