Japanese industrial output in fourth consecutive monthly fall

”Japanese

The Ministry of Economy Trade and Industry has revealed Japanese industrial output fell in September - the fourth consecutive monthly fall.

Figures show output fell 1.9% in September compared with the previous month - way below expectations of a 0.6% fall.

However, the fall was attributed to the strong yen, which is weakening demand for exports.

The yen is currently hovering at a 15-year high versus the US dollar. Last month, the Bank of Japan (BoJ) intervened to stem the currency against – the first time in six years that such action had been taken.

In the meantime, a separate report showed that the Japan is still battling with deflation.

Recent figures revealed Japanese core consumer prices fell 1.1% in September compared with a year ago – representing the 19th consecutive monthly decline that the economy has been in deflation.

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.

In other news, the BoJ’s next rate-setting meeting has been brought forward by 10 days and will now take place on 4-5 November – taking place shortly after the US Federal Reserve’s next meeting – on 2-3 November.

This will leave the BoJ to respond to any measures the US central bank decides to adopt as the Japanese yen continues to strengthen.

A strong yen weakens demand for exports and threatens the economic recovery, and as a result, the Bank has lowered its economic growth forecasts.

The Japanese economy, which is now the world’s third largest, is expected to grow 2.1% in the year to March 2011 and 1.8% the following year.

This compares with previous projections of 2.6% and 1.9% respectively.

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