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Japan’s Production Fell for Fifth Month in October

Workers assemble Toyota Motor Corp.'s vehicles on the production line of the company's Tsutsumi plant in Toyota City, Aichi Prefecture, Japan. Toyota Motor, the world’s biggest automaker, said last week that its domestic vehicle production fell for a second month in October. Photographer: Tomohiro Ohsumi/Bloomberg News
Workers assemble Toyota Motor Corp.'s vehicles on the production line of the company's Tsutsumi plant in Toyota City, Aichi Prefecture, Japan. Toyota Motor, the world’s biggest automaker, said last week that its domestic vehicle production fell for a second month in October. Photographer: Tomohiro Ohsumi/Bloomberg News

Nov. 30 (Bloomberg) -- Japan’s industrial production fell for a fifth month in October as a slowdown in global demand crimps exports and the government’s stimulus effects wear off.

Factory output declined 1.8 percent from September, when it dropped 1.6 percent, the Trade Ministry said in Tokyo today. The median estimate of 25 economists surveyed by Bloomberg News was for a 3.2 percent decline.

Today’s report adds to evidence that Japan’s recovery is losing momentum after figures released last week showed exports grew at the slowest pace this year. Toyota Motor Corp. is among automakers scaling back output after a government subsidy program for fuel-efficient cars ended in September, a factor that together with a stronger yen threatens profits.

“The weakness in production reflects poor demand both at home and abroad and a cautious stance among manufacturers,” Susumu Kato, chief economist for Japan in Tokyo at Credit Agricole CIB and CLSA, said before the report was released. “Production is in a modest adjustment phase.”

The economic impact of a fall-off in sales after the last-minute purchases for cars would be ”huge,” according to Naoki Tsuchiyama, a market economist at Mizuho Securities Co. in Tokyo. Transport equipment accounts for about 14 percent of manufacturers’ gross domestic product, he said.

Consumers rushed to buy vehicles before the end of the government’s subsidy program, helping the nation’s economy grow at a 3.9 percent annual pace last quarter.

Toyota, Honda

Toyota Motor, the world’s biggest automaker, said last week that its domestic vehicle production fell for a second month in October. Honda Motor Co. and Nissan Motor Co., Japan’s second and third largest automakers, also cut their domestic output.

Japan’s shipments of rolled-aluminum products increased at a slower pace last month than September as demand from the auto industry weakened after the government ended the subsidy program.

Exporter earnings are also under threat from the yen’s appreciation. Nikon Corp., the Japanese maker of cameras, lenses and chip-making equipment, this month cut its full-year operating profit and revenue forecasts, citing a stronger yen. The company revised its assumptions for the currency’s exchange rate to the dollar to 80 yen for the six months from Oct. 1, from 90 yen projected three months ago.

The Japanese parliament passed on Nov. 26 an extra budget to fund a stimulus package aimed at fighting deflation and combating the stronger yen. To foster growth, the Bank of Japan last month cut its benchmark interest rate and created an asset-purchase fund.

Still, a slump in production is unlikely to last long because there’s no evidence for “an unintentional build-up” in inventories, Kyohei Morita, chief economist at Barclays Capital in Tokyo.

“Although production will likely be in a soft patch through the January-March period, we do not look for a double-dip,” Morita said.

To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net

To contact the editor responsible for this story: Chris Anstey at canstey@bloomberg.net

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