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Japan Jobless Rate Up, Prices, Manufacturing Fall

Friday's data, coupled with signs of weakening retail sales, show the scale of the challenge in restoring consumer confidence.

By boosting inflation, Japan's planners hope to persuade consumers to spend more now in anticipation of price increases in the future. That could prove a daunting challenge given a drop in real wages over the past two decades and the weak job market, said Susumu Takahashi, head of the Japan Research Institute and a member of a government economic advisory council.

To achieve the inflation target the government must change expectations, he said.

"The only way is for the deflationary way of thinking to change. Without that it will be very hard," he said.

Speaking to lawmakers about the central bank's semiannual report, Kuroda said prices are unlikely to rise for the next few months but after that Japan would see some progress toward its inflation target as the economy moved toward a "moderate recovery path."

The central bank asset purchases and other strategies adopted so far have not been sufficient to reach the inflation target, he said, reiterating his intention to manage market expectations and "make clear that we have adopted the uncompromising stance that we will do whatever is necessary to overcome deflation."

Kuroda was appointed to succeed former BOJ governor Masaaki Shirakawa when he stepped down on March 19, three weeks before his term expired. The parliament is expected to approve his appointment to the five-year term, which is due to begin April 8.

The central bank is due to hold its first regular policy meeting under Kuroda April 3-4, though it may wait until later in the month to embark on any significant moves, such as a boosting its purchases of government bonds to help increase the amount of money available in the economy and encourage more investment by the private sector.

Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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