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Japan Generates Weaker Factory Output in February

March 29, 2013
The economy ministry was also cautiously optimistic, saying that "industrial production has bottomed out and shows some signs of picking up."

TOKYO — Japan's factory output slowed in February, data showed Friday, highlighting the weak state of the world's third-largest economy and underscoring the size of the government's task in sparking sustained growth.

The unemployment rate also crept up last month while consumer prices again fell, showing the difficulty of reversing years of deflation that has crimped private spending and corporate investment.

Industrial production last month contracted 0.1% from January, marking the first month-on-month fall since November, although a survey of producers pointed to a pick-up in factory output for March and April.

The economy ministry was also cautiously optimistic, saying Friday that "industrial production has bottomed out and shows some signs of picking up."

The numbers come ahead of a Bank of Japan policy meeting next week as its new governor, Haruhiko Kuroda, talks up his plans to stoke the economy and reverse years of falling prices.

His vow to beat deflation, a mantra led by his boss Prime Minister Shinzo Abe, has stoked speculation that the BoJ will launch a new wave of aggressive policy measures that tend to weaken the yen, helping the country's exporters.

But "the markets' expectations of the new governor are so high that they will be almost impossible to meet, let alone beat, leaving the risks firmly skewed towards disappointment," said London-based Capital Economics.

Deflation is bad for the economy because it encourages consumers to put off spending in the belief goods will be cheaper in the future, softening demand and hurting producers.

Japan Remains Unsteady

Japan's overall economic picture remains unsteady. But the nation squeaked out of recession in the last quarter of 2012 with modest growth that, analysts said, would provide a foundation for a strengthening economy.

The 0.2% expansion in GDP on an annualized basis in the quarter to December was welcome news for Abe, whose first few months in office have seen renewed optimism over the state of the economy.

Markets have cheered his policies, sending the benchmark Nikkei 225 stock index soaring in the past couple of months, while speculation over further monetary easing measures has helped push down the value of the yen, although Tokyo has faced criticism it was engineering the unit's decline.

Manufacturers have been helped by the weakening in the yen, after the unit hit a record around the 75-level against the dollar in late 2011 and remained strong through most of last year.

The dollar bought 94.10 yen in morning forex trade on Friday.

A strong yen makes Japanese products less competitive overseas and shrinks the yen value of repatriated foreign income.

In 2012, Japan's factory production slipped 0.3% after a decline in 2011 when industry was hammered by the quake-tsunami disaster and Fukushima nuclear crisis.

Japanese consumer prices slipped 0.3% last month from a year earlier, while the jobless rate inched up to 4.3% in February from 4.2% in January.

Copyright Agence France-Presse, 2013

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