Email
Print
ShareTOKYO: Japan's industrial output rose for the ninth consecutive month in November, the longest streak of gains in more than 12 years, driven by demand from the United States and Asia as well as domestic subsidies.
The figures reinforce the Bank of Japan's forecast of a moderate economic recovery next year, although persistent deflation may mean the government will keep up pressure on the central bank to ease monetary policy further.
Manufacturers expect output to continue rising in December and January, which will likely ease the government's fears that the economy will slip into another recession next year.
Economists also say a double-dip is unlikely but warn that the rapid pace of gains in industrial production may not be sustainable, and that manufacturers could curb their output to focus on selling down inventories should sales start to moderate.
"The signs of recovery are very early and are continuing, which is good," said Yoshikiyo Shimamine, chief economist at Dai-Ichi Life Research Institute in Tokyo.
"Recovery in industrial production up to now has been a question of making up for depleted inventories. What will become more of a focus now is whether sales will grow in the new financial year. If sales growth is zero, industrial production growth could also be zero."
Industrial output rose 2.6% in November, beating a median market forecast for a 2.4% rise and well above a 0.5% increase in October, the ministry of economy, trade and industry said on Monday.
Production of cars and car parts powered much of the gains in industrial output, with Japan's government having extended subsidies on energy efficient goods and as stimulus measures in other countries support a recovery in overseas demand.
Transport equipment output rose 5.9%, the ninth straight month of gains. General machinery output, which includes car parts, rose 6.4%, the seventh month of increase.
The benchmark Nikkei average hit a four-month high in reaction to the data and due to hopes that a weakening yen will help the country's exporters.
Manufacturers surveyed by the government expect output to rise 3.4% in December and increase 1.3% in January.
Overall inventories rose 0.2% in November, the first rise in three months. A breakdown showed that car manufacturers have hiked inventories to the highest level since February due to strong demand for hybrid cars.
Flat panel TV makers have also increased inventories to the highest since January as they bet government subsidies will boost sales during Japan's year-end shopping season.
Even if year-end sales do well, Japan's persistently falling wages could hurt domestic consumption next year, leading to slower gains in factory output.
"The latest data shows that Japanese makers of automobiles and home electrical appliances are still hiking their output thanks to the continuing effect of government stimulus as well as strong exports to Asia," said Seiji Shiraishi, chief economist at HSBC Securities in Tokyo.
"But a slowdown (in output) is still expected early next year as the effect of stimulus will likely fade."
The Democratic Party-led government, in office for three months, is determined to keep the economy from slipping back into recession ahead of an election for parliament's upper house in mid-2010.
The Bank of Japan buckled under government pressure this month, calling an emergency meeting to announce a new short-term funding facility and two weeks ago underlined its deflation-fighting credentials by declaring it would tolerate nothing but price growth.
While the central bank has said there is little more it can do with interest rates near zero, it may come under pressure for more action if Japan slips into recession or renewed worry about soaring public debt pushes up bond yields, analysts say.
