Ja­pan's fac­tory out­put falls as weak ex­ports sap de­mand

The Pak Banker - - 6BUSINESS -

Ja­pan's in­dus­trial pro­duc­tion dropped the most since the March 2011 earth­quake as fall­ing ex­ports sapped de­mand and a steel-mill ex­plo­sion halted do­mes­tic car pro­duc­tion at Toy­ota Mo­tor Corp.

Out­put slumped 6.2 per­cent in Fe­bru­ary af­ter ris­ing in Jan­uary, the trade min­istry said on Wed­nes­day. Econ­o­mists sur­veyed by Bloomberg had forecast a 5.9 per­cent drop. The gov­ern­ment projects out­put will ex­pand 3.9 per­cent this month.

The min­istry es­ti­mates that pro­duc­tion for the three months end­ing Thurs­day may shrink. This casts a shadow over gross do­mes­tic prod­uct for the whole quar­ter, un­der­scor­ing Ja­pan's strug­gle to bounce back from a con­trac­tion at the end of last year. Ship­ments of cap­i­tal goods also slumped last month, in­di­cat­ing slug­gish busi­ness in­vest­ment.

"The slump in in­dus­trial out­put in Fe­bru­ary sug­gests that man­u­fac­tur­ing ac­tiv­ity will con­tract this quar­ter," Mar­cel Thieliant, se­nior Ja­pan econ­o­mist at Cap­i­tal Eco­nom­ics, wrote in a note. This means there is a grow­ing risk that the econ­omy won't ex­pand this quar­ter af­ter the con­trac­tion in the fi­nal three months of last year, Thieliant wrote.

With pres­sure build­ing on pol­icy mak­ers to bol­ster growth, Prime Min­is­ter Shinzo Abe said Tues­day that the gov­ern­ment would front load spend­ing af­ter par­lia­ment passed a record bud­get for the 12 months start­ing April 1. He re­sisted calls for a sup­ple­men­tary fis­cal pack­age.

The gov­ern­ment will prob­a­bly com­pile new eco­nomic mea­sures be­fore the Group of Seven Sum­mit in May, said No­rio Miya­gawa, an econ­o­mist at Mizuho Se­cu­ri­ties in Tokyo.

Even tak­ing out the fall in pro­duc­tion at Toy­ota and the lu­nar new year, pro­duc­tion for Fe­bru­ary was poor, ac­cord­ing to Hiroaki Muto, chief econ­o­mist at Tokai Tokyo Re­search Cen­ter.

"The outlook for pro­duc­tion looks weak as de­mand in emerg­ing na­tions, as well as in­dus­tri­al­ized na­tions in­clud­ing the U.S., is slow­ing," Muto said. "Ja­pan's econ­omy may avoid fall­ing into a re­ces­sion, but any re­bound in the first quar­ter will be weak."

The yen strength­ened af­ter the data, trad­ing at 112.49 per dol­lar at 12:59 p.m. in Tokyo. The cur­rency rose af­ter Fed­eral Re­serve Chair Janet Yellen stressed that in­ter­est rates in the U.S. will be raised at a cau­tious pace. The Topix index of stocks was down 0.9 per­cent.

The me­dian from econ­o­mists sur­veyed by Bloomberg is for 0.6 per­cent growth in the Jan­uary-March pe­riod. If gross do­mes­tic prod­uct shrinks again, that would be the sixth quar­terly con­trac­tion and sec­ond re­ces­sion since Abe re­turned as prime min­is­ter in De­cem­ber 2012. Abe came to power promis­ing to re­form the na­tion and drag the econ­omy out of a de­fla­tion­ary malaise. Since then, in­fla­tion rose, and then fell back to about 0 per­cent, and the real econ­omy has grown a to­tal of 2.1pc.

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