Japan Industrial Output Rose Less Than Forecast in December
Japan’s industrial production rose less than economists forecast, suggesting that a recovery in the nation’s manufacturing sector is lagging a weakening yen.
Output rose 2.5 percent from November, when it declined 1.4 percent, the Trade Ministry said in Tokyo today. The median estimate of 25 economists was for a 4.1 percent gain. Production fell 7.8 percent from the previous year.
The outlook for the economy may improve this year as the depreciating yen and Prime Minister Shinzo Abe’s fiscal stimulus measures help to support corporate profits and stoke growth. Goldman Sachs Group Inc. last week raised its growth forecast for the year starting in April to 2 percent from 1.2 percent.
“We don’t need to be too pessimistic about the outlook,” said Naoki Iizuka, an economist at Citigroup Inc. in Tokyo. “Production will probably return to a clear recovery track in the coming months.”
The yen has depreciated more than 12 percent against the dollar in the past three months, the most among 16 major currencies tracked by Bloomberg. It was 0.2 percent higher at 90.94 per dollar as of 11:23 a.m. in Tokyo. The Nikkei 225 Stock Average (NKY) was down 0.6 percent at the lunch break today after gaining for the last 11 weeks.
While the data showed that production of transport equipment rose 6.9 percent on a seasonally adjusted basis, Japan’s three largest automakers -- Toyota Motor Corp. (7203), Honda Motor Co. and Nissan Motor Co. -- reported falling domestic production in December from the previous month.
A drop in production of electronic parts and devices limited the overall increase, the data showed. Output of parts for smartphones fell as shipments to Asia weakened, according to the ministry.
“There are clouds on the horizon for global demand in smartphones,” said Citigroup’s Iizuka. “We need to be cautious about the possibility that inventory adjustments may be prolonged.”
Production of semiconductor and flat-panel manufacturing equipment surged nearly 60 percent in the month, the data showed.
A weaker yen makes products relatively cheaper in export markets and boosts overseas earnings for Japanese companies such as Toyota and Canon Inc. (7751) when repatriated. Manufacturers expect production to rise 2.6 percent in January and 2.3 percent in February, today’s data showed.
Canon, the world’s largest camera-maker, said yesterday it may increase net income 14 percent to 255 billion yen this year.
“There will be a time lag until the weakening yen increases export volume,” said Masamichi Adachi, senior economist at JPMorgan Securities in Tokyo and a former BOJ official. Exports fell for a seventh month in December, while wages dropped and consumer demand stayed weak.
Twelve analysts covering Toyota, Japan’s biggest car manufacturer, have raised their earnings estimates for the next fiscal year. The stock has the highest proportion of buy recommendations in nearly five years, according to analyst ratings tracked by Bloomberg.
Economy Minister Akira Amari said this week that the effects of Abe’s 10.3 trillion yen ($113 billion) stimulus package announced this month would begin to appear in April.
Japan’s gross domestic product shrank in the second and third quarters last year and was forecast to fall in the three months through December, according to the median estimate of economists surveyed by Bloomberg News, with a return to growth forecast this quarter.
Manufacturing in China, Japan’s biggest export market, is expanding at the fastest rate in two years, bolstering prospects that economic growth there will accelerate for a second straight quarter.
Goldman last week raised its six- and 12-month targets on the Topix Index of stocks, saying the effects of Abe’s stimulus measures are not yet priced in.
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