Wednesday, June 16

Japan’s factory output up but consumers curb spending

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TOKYO: Japan’s factory output rose for a ninth straight month in November, but consumers kept a tight hold on their purse strings amid a fragile economic recovery, official data showed yesterday.Japan’s industrial production increased 2.6 per cent in November, extending the longest unbroken expansion since 1997, the government said.

The figure was slightly better than analysts had expected.

“Japanese manufac-turers’ production and profits are growing robustly on the back of expanding exports,” said Naoki Murakami, chief economist at Monex Securities.

With Japan’s population ageing and shrinking, Asia’s biggest economy remains dependent as ever on foreign markets to drive growth in the face of weak domestic consumer spending.

Japan’s retail sales fell by 1.0 per cent in November from a year earlier, marking a 15th consecutive month of declines, a separate report showed.

Another report showed the average Japanese salary last month fell 2.8 per cent from a year earlier, dropping for an 18th straight month.

But with overseas economies clawing back from the global recession, Japan’s factory output is expected to rise 3.4 per cent in December and by a further 1.3 per cent in January, the government said, citing manufacturers’ own forecasts.

“Materials makers are stepping up production as demand from China and the rest of Asia is expanding more strongly than companies had expected,” Murakami said in a report.

Japan’s exports to the rest of Asia rose 4.7 per cent in November, posting the first rise in 14 months.

“Exports are key to the fate of the Japanese economy,” said Hiroshi Watanabe, an economist at the Daiwa Institute of Research.

Factory output is likely to slow somewhat as the recovery in exports moderates, reflecting the fading impact of worldwide stimulus spending efforts, he said.

Japan’s economy returned to growth in this year’s second quarter after a severe year-long recession, but renewed deflation and weak domestic demand are major concerns for policymakers.

Compared with a year earlier, November industrial output was down 3.9 per cent, and is still far below levels seen before the global economic downturn began.

The benefits of higher production in Japan are also limited by the fact that companies are using a chunk of their profits to build new factories overseas, said Hideyuki Araki, an economist at Resona Research Institute.

“Nowadays higher production sometimes results in capital spending elsewhere in Asia” where labour costs are lower, he said. — AFP