A string of data from Japan this week will likely provide further confirmation that the country is emerging from a tax-induced recession, albeit at a slow pace.
Earlier this month, revised gross domestic product (GDP) showed the world's third-largest economy expanded an annualized 1.5 percent in the October-December period, marking a recovery from a technical recession in the preceding quarter. But, the revised figures were below an initial reading of 2.2 percent released in February.
Japan's economy has been on the back foot, shrinking an annualized 7.1 percent in the second quarter of 2014 followed 1.9 percent in in the third, hit by a nation-wide consumption tax. The rise to 8 percent from 5 percent took effect last April and discouraged consumers from spending, forcing the government to postpone a second sales tax hike initially scheduled for this October.
This week's monthly indicators, which include inflation, household spending, jobs and retail sales for February, are expected to show "patchy improvement" in the country, according to Moody's Analytics.
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"The unemployment rate likely edged lower. Japan exited recession last quarter so the job market should pick up through the first half of 2015," analysts wrote in a note issued last week. "Household expenditures and retail sales likely rebounded in February. While real wages [may trend] lower in the near term, early signs point to positive outcomes in the wage negotiations and consumer sentiment could increase on the back of this."
Meanwhile, the closely-watched consumer inflation is seen unchanged from last month, rising 2.2 percent in February from the year-ago period, as the impact of declining oil prices persists. Core consumer inflation – excluding the effects of the consumer tax hike – likely hovered at 0.2 percent, analysts at Moody's Analytics said.
As such, analysts expect further action in the coming months after the Bank of Japan (BOJ) kept its massive monetary policy stimulus intact last Tuesday.
"It is a difficult task to achieve that 2 percent inflation target within the next few years... with oil prices adding to the downward pressure, more weakness in the yen is the way to go," Philip McNicholas, ASEAN economist at BNP Paribas, told CNBC.