• Home
• /
• Rest of Asia
• /
• Economy

Japan's recovery takes big hit

Tokyo - No clear economic turnaround as factory output and retail sales slump

Japan's factory output fell for the first time in three months in November and retail sales slumped, suggesting that a clear recovery in the world's third-largest economy will be delayed until early in 2016.
While manufacturers expect to increase output in coming months, the weak data casts doubt on the Bank of Japan's view that an expected pick-up in exports and consumption will help jump-start growth and accelerate inflation toward its two per cent target.
Industrial output fell one per cent in November from the previous month, more than a median market forecast for a 0.6 per cent decline, data by the trade ministry showed on Monday.
Separate data showed that retail sales fell one per cent in November from a year earlier, more than a median forecast for a 0.6 per cent drop, as warm weather hurt sales of winter clothing.
"We're finally seeing signs of pick-up in exports, but the economy has yet to make a clear turnaround," said Takeshi Minami, chief economist at Norinchukin Research Institute. "There's a risk consumption will remain sluggish and prevent economic growth from picking up," he said.
Japan's economy narrowly dodged recession in July-September and analysts expect only modest growth in the current quarter, as consumption and exports lack steam.
Some analysts warn the economy may suffer a contraction in the October-December period if household spending remains weak in the country
Taro Saito, senior economist at NLI Research Institute, expects consumption in the current quarter to have risen less than a 0.4 per cent quarter-on-quarter increase in the July-September perios.
Bank of Japan
Wary of soft growth, the government plans nearly $800 billion in record spending in the budget for the fiscal year that will begin on April 1. The BoJ has signalled readiness to expand stimulus if risks threaten Japan's recovery prospects. The central bank fine-tuned its stimulus programme on December 18 to ensure it can keep up or even accelerate its money-printing.
While sluggish emerging market demand dims the export outlook, analysts expect output to gradually increase early in 2016 as automakers ramp up production of new models. Manufacturers surveyed by the trade ministry expect to increase production by 0.9 per cent in December and raise it by six per cent in January.
Many analysts share the BoJ's view that output is bottoming out, though some doubt manufacturers will boost production as much as they now project.
"There may be expectations that factory output will improve early next year. But it's uncertain whether the forecasts can be realised," said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute. - Reuters