Industrial production in Japan falls first time in five months

Austin News.Net Tuesday 30th July, 2013

Industrial output fell 3.3 percent in June from May, against expectations for a decline of 1.8 percent.

Household spending for the month fell 2 percent month-on-month, lower than forecasts for a rise of 0.7 percent.

Employment data, however, was a bright spot, with the country's jobless rate falling to 3.9 percent, the lowest since October 2008.

In May, output climbed the most since December 2011. Production slid 4.8 percent in June from a year earlier.

A survey of manufacturers conducted by the ministry in May hinted a 2.4% decline in output in June.

The fall in factory output was primarily attributed to a decline in production of transport equipment, including autos, followed by electronics and machinery.

For July, the manufacturers expect a rapid gain of 6.5%, up from 3.3% projected in last month's survey, backed by exports and private consumption. The ministry also said that output would decline 0.9% in August.

While the monthly decline in factory output indicates challenging conditions in the economy, analysts were of the view that the fall is a temporary phenomenon and predicted that production would jump in the coming months, said IB Times.

Japan's household spending fell 0.4% from a year earlier, while analysts had expected growth of 1.0%.

The country has been trying to boost domestic consumption in an attempt to revive its stagnant economy.

The government led by Shinzo Abe and the Bank of Japan has unveiled a series of aggressive measures to boost domestic demand, which has suffered from years of deflation or falling prices.

Tuesday's report adds to the challenges facing Prime Minister Shinzo Abe, who must decide whether to proceed with the consumption tax increase even though it could slow down a rebound in the economy.

Weakening production would undermine his calls for higher wages to bolster his deflation efforts after temporary boosts from monetary and fiscal stimulus, says Bloomberg.

"The fall in production is likely temporary and will be offset by the expected July increase," said Masaaki Kanno, chief Japan economist at JPMorgan Chase Co. in Tokyo and a former Bank of Japan official. "I don't think there has been a change in the underlying trend for industrial output."

Abe's polices have weakened the yen about 12 percent against the dollar this year, bolstering exporter profits and pushing up stocks.

On Monday, the Bank of Japan governor Haruhiko Kuroda confirmed that the country's planned increase in sales tax rate would not dent its economic recovery.

In the first step, Japan plans to raise sales tax rates to 8% from the current 5% in April 2014 in order to stabilize long-term yields of government bonds and repair public finances. Subsequently, the rate will be raised to 10% in 2015.

However, Abe is seriously rethinking the plan due to concerns that the move will rattle financial markets and affect investor confidence.

Source: http://www.austinnews.net/index.php/sid/216131436/scat/3a8a80d6f705f8cc

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