Japan Output Less Than Forecast as Global Slowdown Hits Post-Quake Rebound
The rebound in Japan’s industrial production after the March 11 earthquake may be coming to an end, making the nation’s economic recovery even more dependent on overseas demand.
Factory output increased a less-than-expected 0.6 percent in July from June, the slowest gain since March, the Trade Ministry said in Tokyo today. Production has recovered to 95 percent of its level before the March temblor and tsunami, the ministry said.
Incoming Prime Minister Yoshihiko Noda faces pressure to reverse three straight quarters of economic contraction just as Europe’s debt crisis and elevated U.S. unemployment undermine global confidence and demand. The yen’s advance to a postwar high against the dollar this month is also threatening the earnings of exporters such as Honda Motor Co. and Denso Corp. (6902)
“The report points to growing concern over the outlook for the economy as the overseas economy is slowing and the yen is staying at a historically high level,” said Shuichi Obata, senior economist at Nomura Securities Co. in Tokyo. “There’s a high chance that the pace of Japan’s recovery will slow in the fourth quarter.”
The median estimate of 28 economists surveyed by Bloomberg News was for a 1.4 percent gain in production after a 3.8 percent increase in June.
The yen traded at 76.55 per dollar at 2:16 p.m. in Tokyo from 76.72 before the report was published. The Nikkei 225 Stock Average was little changed.
Japan’s currency strengthened to a post-World War II record of 75.95 against the dollar on Aug. 19, appreciating even after authorities intervened on Aug. 4 in the foreign exchange market for the first time since March to slow its gains. A stronger yen makes Japanese products less competitive abroad and erodes overseas profits when they’re repatriated.
Government reports this month showed that exports fell more than expected in July, the jobless rate rose for a second month and retail sales dropped, signaling Japan’s economy is struggling to recover.
Today’s output data “suggest that the rapid recovery phase resulting from the restoration of the supply chain is nearly finished and the pace of increase is starting to slow,” Yoshiki Shinke, senior economist at Dai-Ichi Life Research Institute Inc., said in a report today.
South Korean Output
South Korea’s industrial output also increased a less-than- estimated 3.8 percent from a year earlier in July, and slid 0.4 percent from June, Statistics Korea said today.
Japanese manufacturers said they plan to increase output 2.8 percent in August and decrease production 2.4 percent in September, a survey included in today’s report showed.
Denso, Toyota’s biggest auto parts supplier, said the strong yen is undermining its recovery from the quake and may prevent the company from raising its full-year profit forecast.
“Because of the super-strong yen, manufacturing in Japan is placed in a very difficult position,” Denso President Nobuaki Katoh said on Aug. 24. “The negative impact of the yen is offsetting our increase in production.”
Output of electronic parts and devices fell 3.4 percent last month from June, the sharpest decline in three months, today’s report showed.
Production in the transport sector slowed to a 5.3 percent increase after a 19.5 percent gain in June and a 36.6 percent jump in May, according to the data.
Honda Motor, Japan’s third-largest carmaker, said on Aug. 9 it may revise its full-year profit forecast when it announces first-half earnings in October, depending on how long the market’s turmoil lasts.
The government last week unveiled a $100 billion program to aid exporters and spur overseas purchases as the yen’s more than 6 percent advance against the dollar in three months threatens exporters’ sales and profits.
Parliament elected Noda to succeed Naoto Kan yesterday to become the sixth prime minister in five years.
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