BLBG: Japan Production Climbs as Overseas Demand Sustains Recovery
By Aki Ito and Toru Fujioka
Dec. 28 (Bloomberg) -- Japan’s industrial production climbed the most in six months in November, while falling wages restrained retail sales, underscoring the nation’s reliance on overseas demand to sustain the economy’s recovery.
Factory output rose 2.6 percent from the previous month, the Trade Ministry said today in Tokyo. Retail sales advanced 0.2 percent after a 0.9 percent drop in October, and fell 1 percent from a year before, the ministry also said. A separate report showed monthly wages posted an 18th straight monthly drop.
Stocks rose as the manufacturing report signaled that Japan’s exporters are coping with the impact of a stronger yen that threatened to make them less competitive. At the same time, today’s domestic figures underscore why the nation is poised to slip behind China next year as the world’s No. 2 economy.
“We won’t see another recession because exports will keep recovering,” said Naoki Iizuka, a senior economist at Mizuho Securities Co. in Tokyo. At the same time, “consumer spending is in a tight situation” given falling wages, and domestic demand may not see a recovery until 2012, he said.
The Nikkei 225 Stock Average rose 1.43 percent to 10,644.71 at the 12:58 p.m. in Tokyo. Hitachi Construction Machinery Co., the world’s largest maker of giant excavators, gained 2.7 percent, Toyota Motor Co. advanced 1 percent and Tokyo Electron Ltd., the second-largest maker of chip-manufacturing equipment, rose 2.4 percent.
Gradual Recovery
Japan’s Cabinet Office three days ago said the nation’s economy “will probably recover gradually” next year, with a 1.4 percent expansion in the year starting in April. Prime Minister Yukio Hatoyama is aiming to sustain the recovery from the country’s worst postwar recession with measures to buttress household incomes.
After shrinking for four consecutive quarters, Japan’s economy emerged from recession in the three month period ended June 30, overcoming the financial crisis earlier than the U.S. and Europe. Reports show the yen’s surge to a 14-year high of 84.83 on Nov. 27 has yet to hurt sentiment or cut sales.
Companies surveyed by the Trade Ministry in today’s production report said they plan to increase output by 3.4 percent this month and 1.3 percent in January.
A strengthening economy in China, Japan’s largest trading partner, has aided the industrial rebound. China’s statistics bureau on Dec. 25 increased its estimate for 2008 gross domestic product to 31.405 trillion yuan ($4.6 trillion), narrowing the gap with Japan. The International Monetary Fund sees China taking Japan’s spot behind the U.S. in GDP rankings next year.
Japanese exports to Asia rose for the first time in 14 months in November. Elpida Memory Inc., Japan’s largest computer-memory chipmaker, may return to profit for the first time in three years thanks to higher demand, Chief Executive Officer Yukio Sakamoto said this month.
Companies from Toyota to Nissan Motor Co. are also ramping up production at home again. Toyota, Japan’s largest carmaker, increased output for the first time in 16 months in November, while Nissan’s output rose by a 21 percent from a year earlier.
“As long as Japan’s exports pick up and production continues to increase, the economy will stay on a recovery trend,” said Masamichi Adachi, a senior economist at JPMorgan Chase & Co. in Tokyo. “There won’t be a double-dip” slump, he said.
To contact the reporter on this story: Aki Ito in Tokyo at aito16@bloomberg.net; Toru Fujioka in Tokyo at tfujioka1@bloomberg.net
