Japan output up on Asia demand

By Leika Kihara

TOKYO (BestGrowthStock) – Japanese factory output rose for the first time in six months in November and manufacturers expect to boost production in coming months, suggesting that firm demand in Asia will help the economy resume a recovery early next year.

But creeping rises in the yen kept policymakers on alert for risks to the export-reliant economy, with the finance minister repeating his warning that the government would take decisive action to stem any sharp yen rises that could hurt growth.

Industrial output rose 1.0 percent in November, matching a median market forecast and marking the first rise in six months, the Ministry of Economy, Trade and Industry said on Tuesday.

Manufacturers surveyed by the ministry expect output to rise 3.4 percent in December and 3.7 percent in January.

The data bodes well for the fragile economy and underscores the Bank of Japan’s view that growth will pick up modestly early next year on continued support from exports to emerging Asia, lessening the chance of an imminent policy easing by the central bank.

“The headline figure was in line with expectations, but forecasts for December and January came in quite strong,” said Yoshiki Shinke, senior economist at Dai-ichi Life Research Institute.

“Since today’s data shows that the downward risks to the economy have eased, we now have a smaller chance of the BOJ easing its policy further as long as there are no wild market fluctuations caused by some overseas factors.”

Companies increased output of automobile, machinery and electronic parts mainly for export to Asia and the Middle East, the data showed.

Automakers also increased output to restock in anticipation of a pickup in domestic demand next year, a sign that output may have bottomed out after tumbling when government subsidies on low-emission cars expired in September.

“We have already got some positive news from Asian neighbors for October and November. This is confirmation that Japan is benefiting from the recovery of the Asian economies,” said Masamichi Adachi, senior economist at JPMorgan Securities Japan.

Still, the ministry maintained its assessment that industrial output was moving on a weak note, stressing that production has recovered only moderately after steep declines in the past few months.

Financial markets did not react much to the data with yen moves swayed more by broad selling pressure on the dollar.

Japan output up on Asia demand