Surprise rise in Japan factory output

TOKYO • Japan's factory output unexpectedly rose in April as a series of earthquakes in the southern part of the country appeared to have had minimal impact on production, offering some signs of hope for an economy squeezed by weak exports and consumption.

Household spending also fell less than expected in April and job availability hit a 24-year high, a relief for Prime Minister Shinzo Abe, who is expected to delay a scheduled sales tax hike next year to avoid dealing a hammer blow to a fragile economic recovery.

"The effect on output from the earthquakes may linger and inventory levels remain high. But the chance Japan can avert a big slump in second-quarter GDP has risen," said Mr Harumi Taguchi, principal economist at IHS Global Insight.

Factory output rose 0.3 per cent in April from the previous month, confounding market forecasts for a 1.5 per cent drop and following a 3.8 per cent gain in March, data by the Ministry of Economy, Trade and Industry showed yesterday.

The better-than-expected data triggered a brief rebound in the yen that pushed the US dollar off its one-month high against the Japanese currency.

Manufacturers surveyed by the ministry expect output to rise 2.2 per cent in May and increase 0.3 per cent this month, suggesting industrial production has bottomed out. Japanese policymakers have been fighting a battle to fire up the world's third-largest economy, but massive fiscal and monetary stimulus over the past three years have failed to stoke sustainable growth or inflation.

In a glimmer of hope, separate data showed household spending fell 0.4 per cent in April from a year earlier, much less than a 1.4 per cent decline projected by analysts.

Japan's jobless rate was steady at 3.2 per cent in April and the jobs-applicants ratio rose to 1.34, the highest level since November 1991, data showed yesterday.

Japan's economy narrowly averted recession in the first three months of this year and analysts expect only a modest rebound in the current quarter as sluggish global demand and tame wage growth weigh on exports and consumption. Mr Abe, well aware of the risks, has told ruling party officials that he plans to postpone next year's sales tax hike to ensure Japan plays its part to fend off risks of a global economic downturn.


A version of this article appeared in the print edition of The Straits Times on June 01, 2016, with the headline 'Surprise rise in Japan factory output'. Print Edition | Subscribe