Japan's Factory Output Rose at Fastest Pace in Six Months

Demand from China and the rest of Asia is expanding more strongly than companies had expected.

Extending the longest unbroken rebound in 12 years as Asia's biggest economy battles back from recession, Japan's factory output rose at the fastest pace in six months in November, data showed on Dec. 28.

Tokyo stocks hit a four-month high, aided by the robust data. Investors took in their stride news that Finance Minister Hirohisa Fujii, 77, was hospitalized for rest and a check-up due to high blood pressure and fatigue.

Japan's industrial production increased 2.6% in November, posting a ninth straight monthly increase. Compared with a year earlier, November industrial output was down 3.9%, and is still far below levels seen before the global economic downturn began.

"Japanese manufacturers' production and profits are growing robustly on the back of expanding exports," said Naoki Murakami, chief economist at Monex Securities. Factory output is expected to rise 3.4% in December and by a further 1.3% 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. Japan's exports to the rest of Asia rose 4.7% in November, posting the first rise in 14 months.

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 labor costs are lower, he said.

Copyright Agence France-Presse, 2009

TAGS: Trade
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