Japan’s factory output unexpectedly rose the most since December on production of parts for devices including Apple Inc. (AAPL)’s iPhone, providing a bright spot in an economy poised to shrink for a second straight quarter.
Industrial production in October increased 1.8 percent from the previous month, when it dropped 4.1 percent, the Trade Ministry said in Tokyo today. That compares with economist estimates for a 2 percent fall. Production of electronic parts and devices rose 14.7 percent from September, the biggest advance since at least 1998, the ministry said.
The report underscores how reliant Japan’s electronics industry has become on iterations of the iPhone, the newest of which sold 2 million units in first-day orders, in an economy at risk of a recession from a contraction in Europe and diplomatic dispute with China. The latest version of the device, introduced Sept. 21, may have also boosted South Korean industrial production, data today showed.
“Japanese manufacturers are extremely dependent on Apple,” said Hideki Yasuda, an analyst at Ace Securities Co. in Tokyo, who follows technology companies including Sharp Corp. and Toshiba Corp. (6502) “Production rises and falls in line with the timing of Apple product releases.”
Asian stocks rose, with the benchmark regional gauge heading for its second weekly advance. The MSCI Asia Pacific Index gained 0.5 percent at 2:31 p.m. in Tokyo, and the Nikkei 225 Stock Average (NKY) was also up 0.8 percent. The yen was trading at 82.46 per dollar after touching a seven-month low of 82.84 last week.
Korean output rose 0.6 percent last month from September, the second month of gains, Statistics Korea said today. Semiconductor production, including smartphone memory chips, increased 5.4 percent.
Japanese consumer prices excluding fresh food were unchanged from a year earlier, the statistics bureau said in Tokyo today. The median of 23 estimates was for a 0.1 percent drop. The nation’s jobless rate stayed at 4.2 percent for a third month, according to a separate report.
Also today, Japan’s cabinet approved a second round of fiscal stimulus worth 880 billion yen ($10.7 billion) using budget reserves as Prime Minister Yoshihiko Noda attempts to boost the economy before elections on Dec. 16.
The Bank of Japan (8301) policy board will next meet on Dec. 19 and 20, right after the elections. Tetsufumi Yamakawa, head of Japan research at Barclays Securities Japan Inc. in Tokyo, said the central bank will probably wait for January to supply additional monetary stimulus unless the U.S. Federal Reserve makes a large move at its December meeting.
“If the BOJ plays the easing card in December, they will have fewer cards left,” Yamakawa, a former BOJ official, said. “Also, it may be politically difficult to use the easing card because the framework of the new government may not be clear” by the time the BOJ holds its next meeting.
Much of the increase in Japan’s October production was from smartphone displays and memory chips for export to Asia, the trade ministry said. Sharp and Japan Display Inc. are boosting production of liquid-crystal displays for smartphones and tablets as demand increases for iPhones in the pre-Christmas period, Ace’s Yasuda said.
“Japan’s economy will probably return to growth in the first quarter of 2013, after possibly having two consecutive quarters of contraction” through December, Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co. in Tokyo, said before the report. “The U.S. economy is looking solid and China’s economy may have a clear rebound this quarter, boding well for Japanese exports.”
Japan’s economy may fall into a recession in the three months ending December, based on the definition of a recession as two consecutive quarters of contraction. Gross domestic product will decline an annualized 0.4 percent in the fourth quarter, according to a Bloomberg survey of economists, after shrinking 3.5 percent in the third quarter. Japanese recessions are officially defined by a government-charged panel that considers data beyond figures for GDP.
The jobless rate in the euro area probably climbed to a record last month, while Germany is forecast to report retail sales fell in October, surveys showed. Other reports may show Spain’s consumer prices rose at a slower pace in November, and Switzerland’s KOF indicator, which aims to predict the economy’s direction about six months ahead, declined for a second month in November.
U.S. consumer spending probably cooled in October, the Commerce Department may say today. A gauge from the Institute for Supply Management-Chicago Inc. may show business activity expanded this month.
The U.S. economy expanded at an annual pace of 2.7 percent in the July-September period, up from an initial estimate of 2 percent, revised Commerce Department figures showed yesterday.
A Chinese manufacturing index last week signaled the first expansion in 13 months in November, according to a preliminary reading from HSBC Holdings Plc and Markit Economics, adding to signs that economic growth is rebounding after a seven-quarter slowdown in Japan’s largest trading partner.
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