(Corrects month of data to February in first paragraph)
* Feb nationwide core CPI +1.3 pct yr/yr vs f'cast +1.3 pct
* Job market firms up, consumption hit by snowstorms
* Policymakers, analysts see slump after tax hike
By Tetsushi Kajimoto and Stanley White
TOKYO, March 28 Japan's core consumer prices
rose for a ninth straight month in February from a year earlier
and labour demand improved - further evidence the economy is
making headway against years of deflation and stagnation.
Ministry of Finance data showed household spending and
retail sales weakened in February as snowstorms across Japan
kept many consumers at home, but there are already signs that
sales are accelerating this month as shoppers rush to beat a
sales tax hike on April 1.
The dip in consumer spending may be disappointing to some,
but continued tightness in the labour market could bolster
expectations that the economy can weather the sales tax rise to
8 percent from 5 percent, and rebound after a temporary slump in
the April-June quarter.
"The gradual increase in prices is consistent with a
narrowing in the negative output gap," said Hiroaki Muto, senior
economist at Sumitomo Mitsui Asset Management. (A negative
output gap shows the economy is performing below full capacity.)
"The employment situation will also continue to put some
mild upward pressure on prices. Consumer spending came in weak,
but it will rebound next month."
The 1.3 percent annual gain in the core consumer price
index, which includes oil products but excludes volatile fresh
food prices, matched the median estimate in a Reuters poll.
The gain followed a 1.3 percent rise in January and
December, which was the quickest since the 1.9 percent seen in
The narrower inflation index, which excludes food and energy
prices and is similar to the core index used in the United
States, rose 0.8 percent in the year to February.
That matched a high last hit in April 1998 - a sign Japan is
pulling further away from deflation.
Japan's consumer inflation has accelerated in the past
several months since turning positive last June, with the Bank
of Japan's aggressive monetary easing driving down the yen.
Analysts believe inflation may slow in coming months as the
weak yen's tendency to drive up import prices fades away.
Given this trend, many economists doubt that the central
bank can achieve its aim of hitting a 2 percent inflation target
in about a year, due to the persistent output gap and companies'
reluctance to significantly increase capital spending and raise
Analysts polled by Reuters expect the BOJ to ease policy
further by the summer to stimulate growth and accelerate
Analysts expect the economy to contract in the April-June
quarter as consumer spending dips after the sales tax hike takes
effect, before rebounding in July-September.
Separate government data showed Japan's jobless rate fell to
3.6 percent in February, the lowest in more than six years.
The jobs-to-applicants ratio edged up to 1.05, meaning
available jobs outnumber jobseekers. The ratio matched the
median estimate and hit its highest since July 2007,
underscoring the strength of the job market.
Retail sales grew an annual 3.6 percent in February,
exceeding the median estimate for a 3.2 percent annual gain, but
below January's 4.4 percent as a series of snowstorms hit
Household spending tumbled 2.5 percent after inflation in
the year to February, versus the median estimate for a 0.1
percent increase, another sign of bad weather disrupting
economic activity in February.
(Editing by Eric Meijer)