Japan Factory Output Up

Feb. 28, 2011
Strong demand for autos and semiconductor-manufacturing devices

For a third straight month Japan's industrial output rose in January on stronger overseas demand, but the pace was slower than expected and high energy costs amid the Mideast crisis spell fresh risks.

Factory production rose 2.4% month on month, according to the Economy, Trade and Industry Ministry, supported by carmakers and semiconductor-manufacturing devices.

"The rise was way below expectations, but we don't have to be too pessimistic," said Hiroshi Watanabe, economist at Daiwa Institute of Research. "The figure was still firm and suggests a stable recovery."

He said companies were upgrading their production plans as the economic recovery keeps outperforming their earlier projections.

Inventories grew 4.7% in January, the highest rise in comparable data for eight years due to bigger stockpiles of flat screen TVs and other electric appliances and a slowdown in regional shipments during Chinese New Year.

But factories still plan to increase their output by 0.1% for February instead of earlier plans to reduce it by 1.2%, the data showed. The monthly growth is expected to accelerate to 1.9% in March.

Most economists expect Japan's economy to expand again in the January-March period after gross domestic product contracted by an annualized 1.1% in the previous quarter.

Japanese automakers' production in Japan fell 6.3% in January, suffering a year-on-year fall for the fourth consecutive month, according to the Japan Automobile Manufacturers Association. But their exports of cars, trucks and buses posted a 7.3 percent rise, logging growth for 13 months in a row on robust demand from the rest of Asia as well as Russia and parts of Eastern Europe, the association said.

Watanabe of the Daiwa institute however cautioned that vigilance was needed as political turmoil has gripped the Middle East and North Africa in recent months, sending up oil prices. "Higher commodities prices could lead to a standstill in the global economy, which could send the yen higher," dealing a double-hit to Japan's export-dependent economy, he said.

The crisis in the Arab world has led to buying of Japan's safe-haven currency, while the country runs a trade surplus and has rock-bottom interest rates with no real chances of a further cut, Watanabe said.

Copyright Agence France-Presse, 2011

Sponsored Recommendations

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!