Sat, Feb 27, 2010 page11

• Japan industrial output rises, retail sales advance

  DEFLATION While factory output recovered, core consumer prices, which exclude fresh food prices, continued to fall, marking an 11th month of decline

  • AP
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  Japan’s industrial output last month rose for the 11th straight month amid rising demand in China and elsewhere in Asia, while retail sales gained for the first time in nearly one-year-and-a-half. Another decline in consumer prices, meanwhile, cast a shadow over its economic recovery.

  The 2.5 percent gain in factory output — a key barometer of Japan’s economic health — from December exceeded expectations. Kyodo News agency’s survey of economists forecast growth of 1.1 percent.

  Industrial shipments last month rose 2.4 percent month-on-month, the Ministry of Economy, Trade and Industry said yesterday, led by general and electronics machinery. Industrial inventories expanded 1 percent.

  “In general, production is recovering,” the ministry said in a statement.

  Economists said rising demand in China and other Asian countries elped spur production of mainstay Japanese exports like cars and consumer gadgets.

  “Industrial output grew in tandem with rising demand in China,” said Hiroshi Watanabe, economist at Daiwa Institute of Research.

  “Japanese exports of vehicles and construction material to China underlined booming demand in the country,” he said.

  China’s economic growth rose to 10.7 percent in the fourth quarter of last year. Recently, the country — Japan’s biggest export market — has been taking steps to curtail bank lending to cool down its economy to prevent overheating.

  Japanese retail sales, meanwhile, rose 2.6 percent last month from a year earlier, the ministry said in a separate report. It marked the first year-on-year gain in 17 months since a gain of 0.7 percent in August 2008, ministry official Kazuhiko Manaka said.

  Hideki Matsumura, a senior economist at Japan Research Institute, said retail sales were hit hard by the global economic slowdown after the collapse of US investment bank Lehman Brothers Holdings in September 2008.

  A gain after the long downturn was not unexpected given increases in fuel prices and gains in auto sales spurred by tax incentives, Matsumura said.

  In a sign of further worry for Japan’s economy, however, consistently falling prices failed to improve last month.

  The nation’s key consumer price index, which excludes volatile fresh food prices, fell 1.3 percent from the year before, declining for an 11th straight month, the Ministry of Internal Affairs and Communications said. That matched a 1.3 percent decline in December.

  Japan has been battling periods of deflation, or a steady decline in prices, since the 1990s. Deflation is a burden as it can hamper economic growth by depressing company profits, sparking wage cuts and causing consumers to postpone purchases. It can also increase debt burdens.

  The core consumer price figure has improved in recent months, but Matsumura attributed that to gains in gasoline prices. The overall situation regarding deflation “has not improved at all,” he said.
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