Ja­pan fac­tory out­put shrinks again in Aug. on China slow­down

The China Post - - WORLD BUSINESS -

Ja­panese fac­tory pro­duc­tion fell un­ex­pect­edly for a sec­ond month in Au­gust, data showed Wed­nes­day as a slow­down in main­land China and weak do­mes­tic spend­ing hit Prime Min­is­ter Shinzo Abe’s ef­forts to kick­start the world’s num­ber three econ­omy.

The 0.5 per­cent con­trac­tion in in­dus­trial pro­duc­tion fol­lowed a neg­a­tive fig­ure in July and missed mar­ket ex­pec­ta­tions for growth in out­put last month.

The dis­ap­point­ing

data

sup- plied the latest ev­i­dence that Abe’s growth blitz, dubbed Abe­nomics, was fal­ter­ing, af­ter fig­ures last week showed con­sumer prices fell for the first time in more than two years.

Abe’s drive had ap­peared to of­fer the prom­ise of a turn­around, but a slew of re­cent data sug­gests it is fal­ter­ing.

Stan­dard & Poor’s cut its sov­er­eign credit rat­ing on Ja­pan this month, say­ing the gov­ern­ment has lit­tle chance of rein­vig­o­rat­ing the mori­bund econ­omy in the short term, with so­cial wel­fare costs spi- ral­ing.

The fac­tory out­put data re­vived spec­u­la­tion that the Bank of Ja­pan will be forced to un­leash more stim­u­lus to counter the down­turn.

Ja­pan’s econ­omy con­tracted in the sec­ond quar­ter ow­ing to a slow­down in key trad­ing part­ner China, weak con­sumer spend­ing at home and soft ex­ports.

Scores of Ja­panese firms de­pend heav­ily on China, from au­tomaker Nissan to fac­tory ro­bot­ics maker Fanuc.

“To­day’s data con­firm that the eco­nomic re­cov­ery has ground to a halt,” Mar­cel Thieliant from Cap­i­tal Eco­nom­ics said in a com­men­tary.

“We stick to our view that the Bank of Ja­pan will step up the pace of its as­set pur­chases next month.”

The cen­tral bank’s 80 tril­lion yen (US$665 bil­lion) an­nual as­set­buy­ing scheme — sim­i­lar to the Fed­eral Re­serve’s quan­ti­ta­tive eas­ing — was a key pil­lar of Abe pol­icy, although he is strug­gling to make good on pledges to cut red tape and open up the econ­omy.

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