Output Dives at Japan's Factories, Car Plants

For a fifth straight month, Japan's factory output and auto production have plunged, data showed on March 30.

The trade and industry ministry said that factory production in February was down 9.4% from the previous month -- worse than a market forecast of a 9% decline. "Overall, industrial production is dropping quickly," due mainly to slumps in transport equipment, machinery and electronics parts," the ministry said.

The report also said production was expected to pick up as inventories run low, with the ministry forecasting a 2.9% rise for March and a 3.1% increase in April, based on the manufacturers' own forecasts. But the ministry also warned that "it is more than possible for production data in March and April to end up negative."

The Japan Automobile Manufacturers Association meanwhile reported that production dropped 56.2% in February from a year earlier, as output fell for all product segments -- passenger cars, trucks and buses. Unit production reached 481,396 vehicles, down from 1.098 million in the same month last year, it said.

Industry leader Toyota Motor Corp. cut production by 64% to 141,127 units, second-placed Honda Motor Co. reduced output 48.4% to 54,748 and number three Nissan Motor Co. was down 68.8% to 43,885.

The data added to the gloom over Japan's economy, which shrank at an annualised pace of 12.1% in the last quarter of 2008 and is widely believed to be headed for its worst recession since World War II.

And with consumer prices flat, Japan is bracing for another bout of deflation that would hit already struggling businesses harder.

To kick-start Asia's biggest economy, Tokyo is preparing stimulus spending that will "far exceed" two percent of gross domestic product (GDP), the economy and finance minister, Kaoru Yosano, was quoted as saying on March 30.

Japan has approved three stimulus plans since October with spending, tax cuts and other measures worth a combined 75 trillion yen (US$765 billion), although actual fiscal spending totalled only about 12 trillion yen. Yosano has hinted that the upcoming bill would reach around $200 billion.