TOKYO Consumer spending in Japan jumped in September as shoppers frontloaded purchases before a sales tax increase next year, a boost to government efforts to spark demand and end 15 years of deflation.
The 3.7 percent annual gain in household spending was the strongest in six months and blew past the median estimate for a 0.5 percent rise, data from the Internal Affairs Ministry showed on Tuesday.
Retail sales rose 3.1 percent in September from a year earlier, more than the median estimate for a 1.9 percent annual increase, as consumption rebounded from a dip in the middle of this year.
A stronger labour market is also driving gains in consumer spending, which suggests that Prime Minister Shinzo Abe's gamble to beat deflation with government spending and aggressive monetary easing is making progress.
"People are looking to shop before the tax hike, and the jobs situation is improving," said Hiroaki Muto, senior economist at Sumitomo Mitsui Asset Management.
"The negative output gap is narrowing and soon we will have a positive output gap that will contribute to inflation."
Next April, the sales tax will rise to 8 percent from 5 percent. This has helped spur a boom in residential property and prompted many shoppers to buy goods before they become more expensive.
The jobs-to-applicants ratio was 0.95 in September, unchanged from the previous month, when it rose to its highest since May 2008. That compared with the median forecast of 0.96.
The seasonally adjusted unemployment rate fell to 4.0 percent from August's 4.1 percent, figures from the Internal Affairs Ministry showed, matching economists' median forecast.
Abe has made ending deflation and turning around the economy a top priority of his administration. As part of the plan, the Bank of Japan radically expanded its quantitative easing in April to meet a goal of 2 percent inflation in two years.
The central bank is due to release updated inflation and economic forecasts at a policy meeting on Thursday.
Japan's growth has outpaced its Group of 7 rich-country peers so far this year, but whether its pace can be sustained remains to be seen as capital spending -- a weak spot in the economy -- has only recently started to show signs of recovery.
(Editing by John Mair)
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