UPDATE 1-Japan Sept factory output slumps, deflation continues

(For more stories on the Japanese economy, click [ID:nECONJP])

* Sept output down 1.9 pct vs forecast 0.6 pct drop

* Manufacturers expect to trim output in October – govt

* Core consumer prices mark 19th straight annual declines
(Adds analyst quotes, detail)

By Tetsushi Kajimoto and Stanley White

TOKYO, Oct 29 (BestGrowthStock) – Japanese factory output fell for
the fourth straight month in September, the longest streak of
declines in more than a year, adding to signs the economy is
losing momentum as slowing export growth and a strong yen bite.

Core consumer prices also marked their 19th straight month of
annual declines in September and household spending fell from
August, underscoring how sluggish consumption was keeping Japan
mired in grinding deflation.

Industrial production fell 1.9 percent in September, data
showed on Friday, more than a median market forecast of a 0.6
percent drop. That led the government to cut its assessment on
output to say it is on a weakening trend.

Manufacturers surveyed by the Ministry of Economy, Trade and
Industry expect output to fall 3.6 percent in October but bounce
up 1.7 percent in November.

“It’s quite a weak number. Judging from this data, the
economy is already entering a downturn. This shows the economy
won’t perform as good as the Bank of Japan predicted yesterday,”
said Takeshi Minami, chief economist at Norinchukin Research

“Most of the weakness could be explained by the expiration of
government incentives for low-emission cars. But that doesn’t
change the fact factory output is weak. The Bank of Japan may
need to do more to support the economy.”

Japan’s economy bounced back last year from its worst slump
since the World War Two on the back of global recovery, but it
has been losing steam in the past months, weighed down by a
rising yen, softening global growth and weak spending at home.

The government cut its assessment of the economy in October,
saying growth was stalling.

The Bank of Japan was somewhat more upbeat in its long-term
outlook report issued on Thursday, sticking to its forecast that
the economy will return to a moderate recovery path after a
period of weakness. But it predicted a very slow exit from
deflation in the coming years.

Analysts expect no significant upturn at least until early
next year as the expiration of government subsidies for low
emission cars is set to hit factory output.

The government is proposing an extra budget that offers help
to job seekers and promotes subsidies for green technology, but
economists have largely dismissed the chance this will provide an
immediate boost to growth.

Core consumer prices fell 1.1 percent in September from a
year earlier, roughly in line with a median forecast for a 1.0
percent decline and previous month’s 1.0 percent drop.

The so-called core-core inflation index, which excludes food
and energy prices and is similar to the core index used in the
United States, slid 1.5 percent in September from a year earlier.
(Additional reporting by Kaori Kaneko; Writing by Leika Kihara;
Editing by Tomasz Janowski)

UPDATE 1-Japan Sept factory output slumps, deflation continues