Japan household spending jumps, jobs market improves

Will Japan see a retail 'hangover' in April?

Household spending in Japan rose 7.2 percent in March from a year earlier as consumers stepped up spending ahead of an April 1 rise in the country's consumption tax, data on Friday showed.

The rise compared with forecasts for a 1 percent increase by economists polled by Reuters.

Data released at the same time showed Japan's adjusted jobless rate at 3.6 percent in March, unchanged from February, while the availability of jobs hit their highest level in nearly seven years.

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Japan's sales tax rose to 8 percent from 5 percent last month, the first hike in 17 years. There are concerns that the rise could hurt consumption in the months ahead, derailing a recovery in the world's third largest economy.

Economists say wage increases could be key to underpinning consumption and in turn the economy.

Tomohiro Ohsumi | Bloomberg | Getty Images

Friday's data is a sign that a tighter jobs market will boost wages and support consumer spending and is likely to be welcomed in Tokyo.

Over the past year, the Bank of Japan has pumped money into the economy in order to end a period of deflation.

Robert Pavlik, chief market strategist at Banyan Partners in Boston told CNBC he was skeptical about the impact of aggressive monetary stimulus in Japan.

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"You are pushing on a string, you are trying to really influence folks through monetary policy, I don't think it works," Pavlik said.

"It brings with it the potential for massive inflation. I would like to see it go away here in the U.S...Japan's in a different situation, they have been in a deflationary environment for some time. Whether that works, I still question that," he added.