Sat, Jun 29, 2013 - Page 15 News List

Japan’s industrial output rises 2%, CPI stops falling

OUTLOOK:Manufacturers are projecting a 2.4 percent drop this month, followed by a 3.3 percent rebound next month, the economics and trade ministry said


Japan received a dose of upbeat economic news yesterday when the government said industrial production rose 2 percent last month from April, the fourth straight monthly increase, while the most-watched consumer price index (CPI) stopped falling for the first time in seven months.

For years, Japan has been dogged by deflation, or falling prices, which can drag on economic growth, and the Bank of Japan has set a goal of 2 percent inflation within the next two years.

Japanese Prime Minister Shinzo Abe, meanwhile, has embarked on an ambitious economic revival program since taking office six months ago through massive monetary easing, public works projects and structural reforms — dubbed the “three arrows” of “Abenomics.”

Data released by the government showed that the nationwide consumer price index minus fresh foods, which can be volatile, was unchanged from a year earlier after being in negative territory for six months. The last time it was zero percent was in October last year.

The core CPI figure for this month in Tokyo — often used as a predictor for the nation — rose 0.2 percent.

Investors bid up Japan’s benchmark stock index by more than 50 percent between the end of last year and last month amid hopes for a revival, and the economy grew a stronger-than-expected 4.1 percent in annual terms in the first quarter.

However, share prices have fallen back over the past month amid concerns about the effectiveness of Abe’s reform plans, a feeling that prices rose too high too fast, and concerns over the possible scaling back of the US Federal Reserve’s quantitative easing as the US economy improves.

In another bit of other good news, the government said the jobless rate remained at 4.1 percent last month for a third month.

The positive indicators lifted the benchmark Nikkei 225 3.5 percent higher at 13,677.32 yesterday.

The outlook for Japan’s manufacturing sector is a bit choppy. Despite the month-on-month increase, industrial production fell 1 percent compared with a year earlier.

Manufacturers are projecting a 2.4 percent drop this month, followed by a 3.3 percent rebound next month, Japan’s Ministry of Economy, Trade and Industry said.

The report said shipments rose 0.8 percent from the previous month, while inventories fell 0.3 percent, an indication of increased economic activity.

RBS Japan Securities economist Junko Nishioka said she was optimistic that Japan’s economy would continue to improve in the coming months.

“Domestic consumer demand is following the growth in industry production,” she said. “I think it’s the result of a promising economic push.”

Nishioka said preliminary indications suggest the CPI would rise 0.4 percent this month. She said that the yen’s depreciation should help to buoy the economy.

“In 2012, the CPI didn’t stay up because the overall economy was looking down,” she said. “I think what’s different this time is that the depreciation of the yen looks strong. If that continues, the rest of the economy will follow.”

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