Japan’s industrial output up 5.9% on month
The world’s second largest economy received some good news today with the Ministry of Economy, Trade and Industry announcing that industrial production was up 5.9% in May from a month earlier.
The gain was the third consecutive monthly rise with manufacturers predicting that output will rise 3.1% in June and 0.9% in July.
However, despite today’s rise, industrial output in May was still around 30% lower than it was in May 2008 and expectations had been for a slightly larger increase of 6.9%.
Production in May was primarily as a result of higher output of cars and electronic devices.
The export-dependent economy, which was once seen as relatively unscathed by the global financial crisis, has been hit by a slump in demand for its products overseas, particularly cars and electrical goods.
Hirohi Watanabe, an economist at the Institute of Research, said: “Production has been rebounding sharply in response to earlier drastic cuts but the momentum is likely to slow in the months ahead.”
According to Societe Generale’s chief Asia economist, Glenn Maguire, “Things are improving at a dramatic pace in Japan.”
However, many investors will be anticipating the release of the Bank of Japan’s quarterly “Tankan” survey – the closely monitored survey of Japanese business confidence – due for release later this week.
In related news, there are fears that the Japanese economy could be heading for deflation after figures from the Ministry of Finance revealed last week that Japan’s core consumer price index (CPI) fell 1.1% in May compared with the same month last year – the most since records began almost forty years ago.
A short period of deflation (where prices fall rather than increase) could be a serious threat to the economy because it deters consumers and businesses from spending in expectation of falling prices.
The Japanese economy suffered its worst contraction on record in the first quarter of 2009, contracting at an annualised rate of 14.2%.
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