Japanese factories ramped up production for a fifth consecutive month last month, but growth was more moderate than anticipated and a slowdown is expected in the year ahead, official data showed yesterday.
Economists said production in the coming months would be curtailed by a diminishing appetite for cars in the US, although it was not expected to hit Japan's overall economic recovery.
Industrial output rose by 1.4 percent last month, just under a revised 1.5 percent in November and below the market expectation of 1.8 percent growth.
Year-on-year, output grew by 3.8 percent last month. Shipments picked up 1.1 percent from November while inventory stockpiles also grew, by 0.3 percent.
For the whole of last year, industrial production increased an unadjusted 1.3 percent from the previous year.
The data signalled that the world's No. 2 economy remains on a steady recovery path after a slump stretching back over a decade, analysts said. The figures contributed to fresh gains on the Tokyo Stock Exchange, whose benchmark index closed at its highest level since September 2000.
"Although the figure was not as high as the market expected, I can say the economy is definitely going upward just by looking at output rise in the fifth consecutive month," said Masayoshi Yano, a strategist at Tokai Tokyo Securities Co.
Production is expected to increase again by 0.9 percent month-on-month this month but then fall by 1.4 percent next month, said the survey of manufacturers by the Ministry of Economy, Trade and Industry (METI).
But Akio Yoshino, chief economist at Societe Generale Asset Management, said that the market has expected stronger growth in output for more than six months.
"Industrial output has turned out to be below the market forecasts for more than six months. The latest data were also below the forecast by the METI, as the ministry had expected an increase of 4.7 percent for January," Yoshino said.
"The improvement in household income will probably be more moderate than before, and we expect industrial production to grow more modestly," he said.
He also said the pace of growth in export activity could slow, in light of US GDP which cooled to a 1.1 percent annual rate in the quarter to December, the lowest in three years.
The slowing growth in the US could hit Japanese automakers.
"New vehicle demand in the US is bound to peak out this year, which may slow output for Japanese makers, although to a much lesser extent than US makers," Daiwa Institute of Research senior economist Junichi Makino said.
Production of motor vehicles rose 2.7 percent last year, the fourth consecutive year it has grown, the Japan Automobile Manufacturers Association said, with 11.8 percent year-on-year expansion last month.
Even if the auto industry is hit this year, economists were not particularly worried about the nation's recovery.
Japan reported last week that its core Consumer Price Index (CPI) posted its first back-to-back monthly rise in eight years, indicating that the world's second largest economy may be breaking decisively out of its scourge of deflation.
"As the latest CPI, released Friday, showed, there's no doubt that Japan is emerging from deflation. This is in line with the view that the economy is, indeed, growing moderately. But the point is, [Japanese corporations] are a bit more cautious about the outlook," Yoshino said.
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