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Japan has reported weaker-than-expected economic data, underlining the challenges the government faces as it tries to revive the country’s economy.

Industrial output fell 3.3% in June, from the previous month. Compared with the same month a year ago it fell 4.8%.

Meanwhile, household spending declined 0.4% from a year earlier. Analysts had expected growth of 1.0%.

Japan has been trying to boost domestic consumption in an attempt to revive its stagnant economy.

Analysts said that while the data was weak and highlighted the challenges faced by the government, it was not a cause for immediate concern.

“This is a minor blip, the overall trend is that of a recovery in Japan’s economy,” said Masaaki Kanno, Japan chief economist with JP Morgan Securities.

Japan has reported weaker-than-expected economic data, underlining the challenges the government faces as it tries to revive the country's economy

Japan has reported weaker-than-expected economic data, underlining the challenges the government faces as it tries to revive the country’s economy

PM Shinzo Abe’s government has unveiled a series of aggressive measures to boost domestic demand, which has been hurt in part by years of falling prices or deflation.

While falling consumer prices may sound good, they tend to hurt the economy as consumers and businesses put off big purchases in the hope of getting a better deal later on.

Policymakers and analysts have said that ending the deflationary cycle is the key to reviving Japan’s economy.

Earlier this year, the central bank doubled its inflation target to 2% in an attempt to boost consumer prices and spending.

There have been some indications that the steps are having an impact as data released last week showed that consumer prices rose in June, for the first time in more than a year.

The decline in Japan’s factory output was also bigger than forecast.

However, analysts said that the fall was likely to be temporary and predicted that production would jump in the coming months,

“Although June data for factory output was weak, manufacturers’ forecasts for July are strong,” said Yoshiki Shinke, chief economist at Dai-Ichi Life Research Institute.

“I think there is no change in the trend that production is expected to stay on a steady recovery as June trade data was good, benefits from the yen’s weakness are appearing and domestic demand is solid.”

According to a survey conducted by Japan’s Ministry of Economy, Trade, and Industry (METI), manufacturers expect production to rise by 6.5% in July.

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According to official figures, the US economy added a net 195,000 new jobs in June.

The figure was well above economists’ expectations of 165,000. Revisions to data for April and May added a further 70,000 jobs to previous estimates.

The jobless rate remained steady at 7.6% of the workforce, according to the data from the Bureau of Labor Statistics.

The dollar and US bond yields jumped as markets expectations rose that interest rates will start rising in a year.

The euro fell three quarters of a cent against the dollar to $1.282, while gold fell almost 3% to $1,214.36 an ounce.

The yield on 10-year Treasury bonds rose from 2.5% to 2.68% to their highest level in almost two years.

Treasury bonds – the US government’s cost of borrowing – provide an indication of when markets expect the US Federal Reserve to begin raising interest rates, with many analysts now predicting that a move could come as soon as the end of 2014.

The news was initially welcomed on Wall Street, where the Dow, S&P 500, and Nasdaq all opened higher.

The US economy added a net 195,000 new jobs in June

The US economy added a net 195,000 new jobs in June

They turned negative mid-morning but regained the higher ground by afternoon trading.

“US employment data came out on the strong side of expectations,” wrote Brown, Brothers, & Harriman in a note to clients.

“The jobs data will strengthen expectations of tapering Fed asset purchases.”

Economists paid close attention to the number this month due to concerns that the US Federal Reserve might begin to wind down – or “taper” – its policy of propping up the US economy by buying up debts with newly-created money.

Comments by chairman Ben Bernanke in June that indicated that positive economic data in the coming months might lead to tapering of the Fed’s bond buying had roiled markets.

If the US economy continues to add jobs at this pace, the unemployment rate should fall from its current 7.6% to 6.5% by the end of 2014. This is the number the Fed has said the US jobs market must reach before it will end its programme of suppressing rates.

Leisure and hospitality jobs saw the biggest gains in June, as employers hired workers for the summer season.

The data eased fears that the “sequester” – a package of austerity measures that hit the economy in January – would have a negative impact on the jobs market.

The government shed 7,000 jobs in June, slightly less than expected.

Manufacturing, once a bright spot of the recovery, has continued its recent trend of job losses.

This has prompted some to question President Barack Obama’s commitment to the manufacturing sector.

“The president laid out a goal of creating a million new manufacturing jobs in his second term. That effort is off to a terrible start,” said Scott Paul, president of the Alliance for American Manufacturing, an industry trade group.

The broader rate of unemployment – which includes those who would like a full-time job but can only find part-time work, as well as those who have given up looking for a job – increased slightly in June to 14.3%.

While the number of long-term unemployed workers has declined by more than one million over the past year, more than 4.3 million Americans have still been out of work for more than half a year, making up more than a third of the overall unemployed population.

With so many still out of work, pressure on wages has been modest, with hourly earnings rising by 0.2% this June, bringing the total rise for the year to 2.2%.

That is slightly ahead of the US inflation rate, with consumer prices having risen by just 1.4% in June from a year earlier.

The slow rate of wage growth and the large supply of willing workers mean that, while the American recovery continues to pick up steam, pressure on prices continues to be modest.

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