Japan July industrial output falls, signals laboured economic recovery

31 Aug 2015 | Author: | No comments yet »

Japanese Industrial Production Falls.

TOKYO—Japanese industrial production fell 0.6% in July from the previous month, the Ministry of Economy, Trade and Industry said Monday, as the nation’s economy continues to follow a zigzag path amid global uncertainty.Output fell 0.6 percent from June, when it increased 1.1 percent, the trade ministry said on Monday, compared with the median forecast for a 0.1 percent gain in Bloomberg survey. The iShares MSCI Japan ETF (EWJ) gained 10.1% this year. “[Industrial] production clearly lacks momentum,” noted Barclays‘ Yuichiro Nagai, who has gone cautious towards his outlook that the Japanese economy will pick up gradually in the third-quarter.

The world’s third-biggest economy is struggling to recover from a contraction, as slowing growth in China — Japan’s biggest trading partner — weighs on exports. Household spending unexpectedly declined and the Bank of Japan’s key inflation gauge slowed to zero for a third time this year, data for July showed last week. “Production is sluggish because private consumption and exports remain weak,” said Toru Suehiro, an economist at Mizuho Securities Co. “Concern about China and emerging economies is posing a risk to output.” The yen held steady after the output data were released and was trading up 0.4 percent against the dollar at 121.28 at 9:13 a.m. in Tokyo. Be careful with the August number because it is likely to be overstated: For August, however, large increases were projected in electronic parts/devices (3.0%) and information/communications equipment (16.2%), the two industries with the greatest variation between actual and forecast production.

Industrial production “appears to be more fragile than expected,” wrote Credit Suisse‘s Hiromichi Shirakawa, adding:”The rate of growth remained around zero percent in yoy terms (+0.2% yoy) despite fading of the base effect of the April 2014 VAT hike.” Bank of Japan Governor Haruhiko Kuroda said in New York last week that weakness in production and exports would pass and that leading indicators point to a pick up in business investment. The government and central bank should boost stimulus if the economy fails to grow again this quarter, Koichi Hamada, an adviser to Prime Minister Shinzo Abe, said last week. “Companies tend to be too optimistic about future production levels,” said Thieliant. “The upshot is that the economy should rebound only modestly this quarter.”

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