Japan's industrial output rises less than expected
Japan's industrial output rose by less than expected in December, the government said on Wednesday, issuing a gloomy outlook amid concerns about the impact of the US economic slowdown.
By Agencies |
TOKYO: Japan's industrial output rose by less than expected in December, the government said on Wednesday, issuing a gloomy outlook amid concerns about the impact of the US economic slowdown.
Japanese companies rely heavily on demand from American consumers and there are concerns that the subprime loan crisis will continue to weigh on exports, which have been a key driver of a recovery in Asia's largest economy.
Japan's plants and factories boosted their production by 1.4 percent in December from the previous month, following a drop of 1.6 percent in November.
But the size of the rebound disappointed markets, which had been hoping for a bigger increase of 2.1 percent.
The government revised its assessment of the overall trend industrial production, which it said was generally "flat", compared with its view last month that output was on a moderate uptrend.
The downgrade came as the trade and industry ministry predicted that production would fall by 0.4 percent in January and by 2.2 percent in February.
"Since the projections are negative, it is difficult now to say production is on even a moderate uptrend," a ministry official said.
It is the first time since January 2005 that the index has been forecast to drop for more than single month.
Industrial output has been on a downtrend since peaking in October as Japan's economy slips into recession, Goldman Sachs senior economist Naoki Murakami said.
"Exports to China, which had been strong until October, are slowing down and pressure to adjust production is intensifying, particularly in the high-tech sector, as consumption is losing steam in the United States," he said.
"Manufacturing cycles are a decisive factor in judging Japan's economic cycles. In this regard, the Japanese economy has already entered a recession at least for the immediate future," he added.
For the whole of 2007, Japan's industrial output rose 2.7 percent from the previous year to hit a record high for a second consecutive year.
"Some months marked high growth in 2007 to bring the annual index to a record high, but it is difficult to have a bullish view about the immediate trend," the ministry official said.
If industrial output enters a downturn, the overall economy will be badly hit, analysts warned.
"Production growth at manufacturers had been the lone bright spot, but warning lights are flashing now," said Morgan Stanley economist Takehiro Sato.
"Industrial production may well have peaked. If so, both the US and Japanese economies could see dual recessions."
The world's second-largest economy is slowly recovering from a slump stretching back more than a decade, but there have been concerns about lacklustre consumer spending and slowing exports to the United States.
The stronger yen against the dollar is also making life tougher for Japanese companies.
"With the US economy likely slowing further in coming quarters, Japan's production seems likely to soften in the first half of the year," warned Lehman Brothers economist Hiroshi Shiraishi.
While a severe downswing looks unlikely, "the uncertainty over the global outlook remains elevated, and the risk to Japan's export-dependent industrial sector is clearly on the rise," he added.
Japanese companies rely heavily on demand from American consumers and there are concerns that the subprime loan crisis will continue to weigh on exports, which have been a key driver of a recovery in Asia's largest economy.
Japan's plants and factories boosted their production by 1.4 percent in December from the previous month, following a drop of 1.6 percent in November.
But the size of the rebound disappointed markets, which had been hoping for a bigger increase of 2.1 percent.
The government revised its assessment of the overall trend industrial production, which it said was generally "flat", compared with its view last month that output was on a moderate uptrend.
The downgrade came as the trade and industry ministry predicted that production would fall by 0.4 percent in January and by 2.2 percent in February.
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"Since the projections are negative, it is difficult now to say production is on even a moderate uptrend," a ministry official said.
It is the first time since January 2005 that the index has been forecast to drop for more than single month.
Industrial output has been on a downtrend since peaking in October as Japan's economy slips into recession, Goldman Sachs senior economist Naoki Murakami said.
"Exports to China, which had been strong until October, are slowing down and pressure to adjust production is intensifying, particularly in the high-tech sector, as consumption is losing steam in the United States," he said.
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"Manufacturing cycles are a decisive factor in judging Japan's economic cycles. In this regard, the Japanese economy has already entered a recession at least for the immediate future," he added.
For the whole of 2007, Japan's industrial output rose 2.7 percent from the previous year to hit a record high for a second consecutive year.
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"Some months marked high growth in 2007 to bring the annual index to a record high, but it is difficult to have a bullish view about the immediate trend," the ministry official said.
If industrial output enters a downturn, the overall economy will be badly hit, analysts warned.
"Production growth at manufacturers had been the lone bright spot, but warning lights are flashing now," said Morgan Stanley economist Takehiro Sato.
"Industrial production may well have peaked. If so, both the US and Japanese economies could see dual recessions."
The world's second-largest economy is slowly recovering from a slump stretching back more than a decade, but there have been concerns about lacklustre consumer spending and slowing exports to the United States.
The stronger yen against the dollar is also making life tougher for Japanese companies.
"With the US economy likely slowing further in coming quarters, Japan's production seems likely to soften in the first half of the year," warned Lehman Brothers economist Hiroshi Shiraishi.
While a severe downswing looks unlikely, "the uncertainty over the global outlook remains elevated, and the risk to Japan's export-dependent industrial sector is clearly on the rise," he added.
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