Ja­pan fac­tory out­put rises fastest, out­look un­cer­tain

The Pak Banker - - MARKETS/SPORTS -

Ja­pan's in­dus­trial out­put rose the most in a year in Jan­uary, ten­ta­tively sig­nal­ing a pick up in fac­tory ac­tiv­ity, but the out­look re­mains far from as­sured given global mar­ket jit­ters and weak­en­ing de­mand both at home and abroad.

The 3.7 per­cent month-on-month gain com­pared with econ­o­mists' me­dian es­ti­mate of a 3.3 per­cent gain in a Reuters poll, and fol­lowed a 1.7 per­cent drop in De­cem­ber, trade min­istry data showed.

It was the fastest gain since Jan­uary 2015, led by pro­duc­tion of cars, elec­tron­ics parts and gen­eral-pur­pose ma­chin­ery, but man­u­fac­tur­ers see poor prospects for in­dus­trial out­put in the com­ing months.

Retail sales fell 0.1 per­cent in Jan­uary year-on-year and 1.1 per­cent month-on­month, fol­low­ing a con­trac­tion in fourth quar­ter gross do­mes­tic prod­uct, un­der­scor­ing weak­ness in pri­vate con­sump­tion which ac­counts for about 60 per­cent of the econ­omy.

Pol­i­cy­mak­ers will scru­ti­nize com­ing data, in­clud­ing Jan­uary house­hold spend­ing due on Tues­day, for more clues to health of the econ­omy.

"Ex­pec­ta­tions for ad­di­tional mon­e­tary and fis­cal pol­icy ac­tion could rise if weak­ness in con­sumer spend­ing and the broader econ­omy per­sist," said Yuta Egashira, econ­o­mist at SMBC Nikko Se­cu­ri­ties. "The risk of two straight quar­ters of eco­nomic con­trac­tion can­not be ruled out," he said, rais­ing the pos­si­bil­ity of Ja­pan suf­fer­ing a tech­ni­cal re­ces­sion.

Man­u­fac­tur­ers sur­veyed by the min­istry ex­pect out­put to fall 5.2 per­cent in Fe­bru­ary and grow 3.1 per­cent in March. Based on th­ese es­ti­mates, out­put would fall 0.3 per­cent over Jan­uary-March from the prior quar­ter, a trade min­istry of­fi­cial said. "Out­put is prob­a­bly weaker than the head­line fig­ure showed."

Mon­day's in­di­ca­tors fol­lowed data out ear­lier this month show­ing ex­ports fell the most in Jan­uary since the 2009 global fi­nan­cial cri­sis, un­der­scor­ing the ab­sence of a growth en­gine for Ja­pan's econ­omy, the world's third largest.

A record num­ber of for­eign tourists in Ja­pan has been a boost for re­tail­ers such as depart­ment stores as some of th­ese vis­i­tors, Chi­nese in par­tic­u­lar, have gone on a so-called "ex­plo­sive buy­ing" spree.

Nev­er­the­less, retail sales fell in Jan­uary for a third straight month, sug­gest­ing mild win­ter weather and a cool­ing con­sumer mood with the ris­ing costs of food and ne­ces­si­ties more than off­set gains from boom­ing tourism.

Ja­pan's econ­omy con­tracted by an an­nu­al­ized 1.4 per­cent in Oc­to­berDe­cem­ber, more than ex­pected, as pri­vate con­sump­tion and ex­ports slumped.

An­a­lysts say any re­cov­ery in the cur­rent quar­ter will be mod­est be­cause of weak de­mand both at home and abroad. The BOJ's im­ple­men­ta­tion of neg­a­tive in­ter­est rates this month has not helped turn around sen­ti­ment, keep­ing alive spec­u­la­tion that the bank will ease pol­icy again in com­ing months.

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