Japan's Factory Output Rose for Sixth Straight Month

Manufacturers are expecting a further 2.2% increase in October.

As Asia's biggest economy limps out of its worst slump in decades, Japan's factory output rose for a sixth straight month in August, the longest unbroken expansion in 12 years, data showed on Sept. 30.

Japanese car makers are ramping up their output again after idling plants and firing thousands of workers in response to a slump in demand. That helped Japan's industrial output to rise by 1.8% in August from July, led by higher production of cars, electronics and machinery, official figures showed.

Manufacturers painted a bright picture of the outlook, predicting factory output would rise 1.1% in September and a further 2.2% in October.

"We are starting to see some green shoots," said Randall Jones, an economist with the Organization for Economic Cooperation and Development. "We think that in the second half of 2009 there will be positive growth in Japan."

In 2010 the Japanese economy will grow by 0.9%, after a brutal 6% contraction this year, the OECD predicted on Sept. 30, urging the authorities to keep up their stimulus measures.

Japan's factory output was still down 18.7% in August compared with a year earlier, reflecting a plunge in production at Japan's plants and factories since the global economic downturn began.

Vehicle production was down 25.9% in August from a year earlier, the Japan Automobile Manufacturers Association reported. But the year-on-year fall slowed for a sixth straight month. At the height of the crisis in February Japan's auto output had been down 56.2%.

Japan sank into recession in the second quarter of 2008 as its exporters reeled from a slump in demand in overseas markets. Its economy grew in April-June for the first time in five quarters, but the unemployment rate is at a record high and deflation is deepening amid weak domestic demand, while a strong yen is threatening exports.

Much of the rebound has been fuelled by government stimulus spending and there are worries about what will happen when the positive effects fade.

The central bank's quarterly Tankan business survey on Oct. 1 is expected to show a further improvement in sentiment among corporate executives over the past three months. The last survey in June showed business confidence among major Japanese manufacturers had improved for the first time in two and a half years.

Copyright Agence France-Presse, 2009

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