Monday June 29, 08:47 AM
Japanese industrial output rises for third month
By Miwa Suzuki
TOKYO (AFP) - Japan's industrial output rose for a third straight month, matching the fastest pace in 56 years, as the world's number two economy claws back from its worst recession on record, data has shown.
Japanese manufacturers moved swiftly to idle production lines after the global economic downturn sent their exports plunging. Having succeeded in reducing their bloated stockpiles, they are now ratcheting up output again.
Production rose 5.9 percent in May from the previous month, matching April's revised growth, which was the strongest since a record 7.9 percent increase in March 1953, according to the trade and industry ministry.
Production is likely to continue to climb through September on the back of rising exports and economic stimulus measures, predicted Barclays Capital's chief Japan economist, Kyohei Morita.
"However, we have yet to see a self-sustaining economic recovery backed by a turnaround in capital expenditure," he added.
Market expectations had been for a slightly bigger increase of 6.9 percent. Compared with a year earlier, production was down 29.5 percent, underscoring the drastic measures taken by firms since the economic crisis erupted.
Output growth is expected to slow to 3.1 percent in June and to 0.9 percent in July, according to manufacturers' forecasts, the ministry said.
"Production has been rebounding sharply in response to earlier drastic cuts but the momentum is likely to slow in the months ahead," said Hiroshi Watanabe, an economist at the Daiwa Institute of Research.
Production in May was largely boosted by higher output of automobiles, mobile telephones and electronic devices, which had seen a particularly sharp decline in demand due to the global economic slowdown.
While output is now rebounding, it remains much lower than it was before the crisis began.
Production of cars, trucks and buses in Japan was down 41.4 percent in May from a year earlier, while exports were 55.9 percent lower, the Japan Automobile Manufacturers Association said Monday.
Japan entered recession in the second quarter of 2008 as its heavy reliance on overseas markets as an engine of economic growth left it highly vulnerable to the fallout from the global economic crisis.
The Japanese economy suffered its worst contraction on record in the first quarter of 2009, shrinking at an annualised pace of 14.2 percent.
Recent data have sparked hopes that the worst of the slump in exports and industrial production is now over, but analysts warn that any recovery is likely to be long and slow as consumers in Japan and overseas are reluctant to splurge.
"We cannot strongly hope for the sustainable recovery of the economy," said RBS (LSE: RBS.L - news) economist Junko Nishioka.
Investors are now turning their attention to a closely watched survey of Japanese business confidence due out on Wednesday.
The Bank of Japan's quarterly "Tankan" survey is expected to show an improvement in sentiment among Japan's major manufacturers from a record low the previous quarter, helping to underpin improving investor confidence.
"Things are improving at a dramatic pace in Japan," Societe Generale (Paris: FR0000130809 - news) 's chief Asia economist, Glenn Maguire, wrote in a note to clients.
"Japanese firms were amongst the first to cut production, wages, and working hours, and are now in a position to respond more flexibly to a rebound in external demand, even if it is soft."
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