Japanese industrial production takes diveJapan’s industrial production fell in June the most since March 2011, when the nation was hit by a record earthquake, as automakers cut output for a second month after a surge in April.
Output declined 3.3 percent from the previous month, Japan’s Trade Ministry said yesterday in Tokyo, after climbing the most in May since December 2011.
Production slid 4.8 percent from a year earlier in June. The jobless rate was 3.9 percent, the lowest since 2008, a separate report showed.
Today’s report adds another challenge for Prime Minister Shinzo Abe, who must decide whether to proceed with a consumption-tax increase that threatens to arrest a rebound in the world’s third-largest economy.
Weakening production would undermine his calls for higher wages to bolster his reflation efforts after temporary boosts from monetary and fiscal stimulus.
“The fall in production is likely temporary and will be offset by the expected July increase,” said Masaaki Kanno, chief Japan economist at JPMorgan Chase in Tokyo. “I don’t think there has been a change in the underlying trend for industrial output.”
A survey of economists had predicted a 1.5 percent drop. Production is expected to rise 6.5 percent in July from June, then drop 0.9 percent in August, according to a survey of companies by the ministry.
Abe’s polices have weakened the yen about 12 percent against the dollar this year, bolstering export profits and pushing up stocks. The Topix index of shares advanced 1.6 percent as of 12:42 p.m. in Tokyo - even after today’s production figures - and was heading for the first gain in five days.
While the low jobless rate mainly reflected a decline in the work force, the labor market is “improving gradually but steadily,” said Miwako Nakamura, a Tokyo-based economist at JPMorgan.
Car production in Japan fell in June, with Toyota Motor’s output dropping 9.9 percent from a year earlier, Honda Motor’s falling 35 percent and Nissan Motor’s down 7.9 percent.
Japan has a 30 percent chance of tipping into its fourth recession since 2008 should Abe proceed with increasing the sales tax to 8 percent in April from the current 5 percent, according to the median of 23 estimates in a Bloomberg survey this month. He’ll need a 5 trillion yen ($50 billion) fiscal package to cushion the impact of the increase, the survey showed. Bloomberg
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