Japan's Factory Output Rises for Fifth Month

Industrial output increased by 1.9% in July from June, but was down 22.9% compared with a year earlier.

Japan's factories boosted production for a fifth straight month, but wages and retail sales remained weak, data showed on August 31, highlighting the rocky recovery path facing the world's number two economy.

Industrial output increased by 1.9% in July from June, but was down 22.9% compared with a year earlier, reflecting a plunge in production at Japanese manufacturers since the global economic downturn began.

Factory output is expected to rise a further 2.4% in August and by 3.2% in September, according to the manufacturers' own forecasts, the trade and industry ministry said.

"We believe production is likely to continue trending higher into July-September on support from exports and economic stimulus," said Barclays Capital economist Kyohei Morita. "However, we have yet to see a self-sustaining economic recovery backed by a turnaround in capital expenditure."

Morgan Stanley economist Takehiro Sato said the effect of U.S. economic stimulus spending should "show up in earnest from October" in the output data. "We doubt Japan's production uptrend will falter drastically in October-December," he said.

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.

Its economy grew in April-June for the first time in five quarters, but unemployment hit a record high of 5.7% in July and deflation deepened, clouding prospects for a full-fledged economic recovery.

Data released on August 31 indicated that Japan's domestic economy remains weak. Average monthly wages for regular workers fell 4.8% in July from a year earlier, after a record decline of 7% in June, the government reported. Retail sales dropped 2.5% in the same month -- their 11th straight year-on-year decline.

Copyright Agence France-Presse, 2009

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