Japan's industrial output rise lifts recovery hopes

by Miwa Suzuki
AFP Global Edition

Jan 31, 2012 00:49 EST

Japan's uncertain post-catastrophe economic recovery appeared to be tentatively gaining traction as official data showed industrial output rose by more than expected in December.

With predictions for further rises in the coming months and production levels in key sectors of the economy now higher than before the quake-tsunami disaster of March, analysts said there were signs of light.

But they cautioned that worldwide economic weakness and Europe's deep-seated debt problems could still stymie any real gains for Japan, while a persistently strong yen would continue to make life hard for exporters.

Latest figures, released on Tuesday, showed industrial output was up 4.0 percent in December from November, beating market expectations of a 2.8 percent rise and reversing a 2.7 percent fall in November.

Year-on-year it was down 3.5 percent, knocked sideways by the body-blow of the March 11 disaster, which disrupted supply chains across the country and cut electricity production as nuclear power generators dropped offline.

The same sectors that contributed to the annual output fall -- telecommunications equipment, cars and other transport equipment and electronic parts -- were responsible for the December rise.

Household spending in December also rose by an inflation-adjusted 0.5 percent from a year earlier, the first positive figure since a 0.5 percent increase in February 2011.

Satoshi Osanai, economist at Daiwa Institute of Research, called the production data "solid", noting the ministry's survey of producers showed output was to rise 2.5 percent in January and another 1.2 percent in February.

"There are recovery signs" in industrial production as the figures showed production had exceeded pre-disaster levels in the mainstay transport and machinery sectors, which include cars and construction equipment, he said.

But Osanai added: "We need to pay attention to risk factors, including the global economic trend amid the European debt problems and the yen's strength."

Japan's crucial export sector has been complaining for months over the value of the yen, which set a series of post-War highs against the US dollar in 2011 and remains close to those levels.

A strong yen makes Japanese products more expensive abroad and eats away at repatriated profits.

The strength of the currency was partially responsible for figures announced last week showing Japan recorded its first annual trade deficit for more than 30 years, with fossil fuel imports jumping to power electricity generation.

Naoki Murakami, chief economist at brokerage Monex, said: "Manufacturing activity had been levelling off since last summer due to a stalled recovery in exports but is believed to have picked up again late last year.

"The focus is whether the recovery of the US economy will be able to make up for a slowdown in Europe and other parts of the world, but the recovery in Japanese manufacturing activity suggests stable growth of the global economy is continuing," he said.

The overall output figure has been volatile in recent years, with a 21.9 percent plunge in 2009 in the aftermath of the crisis sparked by the Lehman Brothers collapse, followed by a 16.4 percent year-on-year jump in 2010.

The Japanese economy was hit by a series of blows in 2011, most prominently the March disaster that left more than 19,000 people dead and missing and triggered the Fukushima nuclear crisis.

Electricity cuts followed across the country as atomic generating capacity was taken offline, and the catastrophe wreaked havoc on manufacturers' supply chains.

Flooding in Thailand, where many Japanese companies have subsidiaries and parts suppliers, had a similar effect later in the year.

The jobless rate edged up to 4.6 percent in December from 4.5 percent in the previous month, the ministry of internal affairs and communication said.

But Keiji Kanda, economist at Daiwa Institute of Research, said the unemployment data "were not bad as the headline figures look".

"Details of the data show more men started seeking jobs... while more people voluntarily quit their jobs rather than losing them against their wish," he said.

Source: AFP Global Edition


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