Japan’s industrial production rose less than forecast in April, underscoring concern Europe’s sovereign-debt crisis and a stronger yen may limit the rebound in the world’s third-largest economy.
Factory output gained 0.2 percent from the previous month, when it rose 1.3 percent, the Trade Ministry said in Tokyo today. The median estimate of 26 economists surveyed by Bloomberg News was for a 0.5 percent increase.
Japan's growth may slow in the second half of the year as a boost from earthquake reconstruction spending fades. Currency gains add to that risk, with the yen rising to its strongest level since February against the dollar today, threatening the sales and profits of exporters.
“Japan may already be in a soft patch,” said Takahide Kiuchi, chief economist at Nomura Securities Co. in Tokyo who accurately predicted the month-on-month increase in output. “There’s a growing concern about whether Japan can sustain a recovery after the effect of reconstruction fades.”
The yen traded at 78.76 as of 11:15 a.m. in Tokyo, the strongest since Feb. 16. Finance Minister Jun Azumi told reporters in Tokyo today that excessive yen moves in a short period of time are undesirable and that he is watching movements closely. The Nikkei 225 Stock Average fell 1.9 percent.
The European debt crisis and concerns that Greece may exit the euro are increasing demand for the yen as a haven, pushing the currency back toward the record high reached in October of 75.35 against the dollar. A stronger local currency erodes the value of overseas earnings and Japanese companies’ global competitiveness.
Elsewhere in the region, South Korea’s industrial production rose 0.9 percent in April, the most in three months, as improving domestic demand offset exports hurt by Europe’s debt woes.
Japanese government subsidies for purchases of fuel-efficient cars, which contributed to gains in consumer spending in the first quarter, may expire as early as the end of August, slowing production later this year, according to Satoshi Osanai, economist at Daiwa Institute of Research in Tokyo.
“Production was on a recovery track, supported by a rebound in cars after the Thai floods last year, but looking ahead, output may go into a lull, led by a slowdown in automobiles,” Osanai said. “Also, output of steel and machinery will probably slow as exports to Asia remain weak.”
Production and shipments of cars and other transport equipments rose in April, while those of electric parts and devices as well as information and communication electronics equipment fell. Output of cars and other transport equipment is forecast to decline in May and June, according to today’s report.
Japanese manufacturers said they plan to decrease output 3.2 percent in May and increase production 2.4 percent in June, a government survey included in today’s report showed. If these forecasts are accurate, production would fall 0.8 percent this quarter from the previous three months, according to the ministry. That would be the first decline in four quarters.
Data for April may signal that economic growth could lose momentum after expanding at an annualized 4.1 percent in the first quarter. The unemployment rate unexpectedly increased to 4.6 percent in April from 4.5 percent, the first increase in three months, while retail sales fell 0.3 percent from March, government reports showed on May 29. Japan’s exports rose a less-than-estimated 7.9 percent in April from a year earlier.
Panasonic Corp. and Sony Corp. are among exporters who are losing customers to their overseas rivals, prompting them to cut labor costs.
Panasonic, the biggest employer among companies on the Tokyo bourse, may cut jobs at its headquarters after streamlining operations at production units, Yuko Hosaka, a Tokyo-based spokeswoman, said on May 29. The Nikkei newspaper reported that its headquarters workforce of about 7,000 will be cut by 3,000 to 4,000 through attrition and transfers to subsidiaries.
Sony, cutting 10,000 jobs after four straight years of losses, forecast on May 10 that profit would be less than half of what analysts estimated as TV and PlayStation 3 sales slump.