Bloomberg News

Japan Production Rebound at Risk as Azumi Warns on Yen: Economy

January 31, 2012

Jan. 31 (Bloomberg) -- Japan’s industrial production rose more than forecast in December as automakers rebounded from flooding in Thailand that disrupted their supply chains.

Sustained gains may be more challenging as an unresolved Greek debt restructuring sends investors into the yen as a haven, risking damage to Japan’s exporters. Production figures from neighbor South Korea today underscored the damage from Europe’s crisis, with output falling more than predicted.

“There is zero chance exports are going to rise in the first half of 2012 because of the global slowdown, so Japan’s economy will continue to stagnate,” said Yoshimasa Maruyama, chief economist at Itochu Corp. in Tokyo by telephone. “December figures were influenced by the one-time recovery of production by carmakers after the Thai floods.”

Japan’s factory output rose 4 percent from November, when production slid because of disruptions from Thailand’s worst flooding in seven decades, trade ministry figures showed in Tokyo today. The median estimate of 30 economists surveyed by Bloomberg News was for a 3 percent increase. Separate data showed the nation’s jobless rate rose to 4.6 percent in December from 4.5 percent the previous month.

South Korea’s production slid 0.9 percent from November, a third straight decline, a deeper drop than all 11 economists surveyed by Bloomberg had anticipated.

Yen Appreciation

A three-day rally in the yen has brought it less than 2 percent from its postwar high of 75.35 against the dollar, with the currency at 76.40 as of 9:33 a.m. in Tokyo.

Finance Minister Jun Azumi told reporters today that “we are ready to act decisively against excessive and speculative currency moves if needed.” Officials last year intervened with record sales of yen to counter exchange-rate appreciation.

Industrial output for October-to-December declined 0.4 percent, underscoring concern the economy might have shrunk for the third time in four quarters. For the full year, production fell 3.5 percent, hurt by the record March 11 earthquake and tsunami, power disruptions after the accident at the Fukushima Dai-Ichi plant and the Thai flooding as well as Europe’s crisis.

Euro leaders left a Brussels summit late yesterday with no accord over how to plug Greece’s widening budget hole and German Chancellor Angela Merkel voicing frustration with the Athens government’s failure to carry out an economic makeover.

Europe Data

Data in Europe today may show that Germany’s economy has withstood the crisis better than most, with retail sales advancing 0.8 percent in December from the previous month and unemployment falling by 10,000, according to the median projections in Bloomberg surveys of economists. France may report its consumer spending increased 0.2 percent. In the U.S., a private report may show house prices dropped in November.

In a sign the rebound in Japanese output hasn’t yet improved conditions in the job market, payrolls fell by 30,000 in December, the first drop since August, and the number of unemployed rose for a third month, according to today’s report.

Automakers said they expect demand to recover this year. Toyota Motor Corp., the world’s largest seller of gasoline- electric autos, revised sales up last week by 100,000 vehicles from December, on demand for hybrids buoyed by government tax breaks on fuel-efficient cars. Honda Motor Co. President Takanobu Ito last week forecast the highest business results for Japan’s third-largest carmaker in at least five years, led by North American sales.

“It will be the year of the complete rebound,” Ito said in an interview.

Production in the transport equipment industry increased 12.3 percent in December, the largest gain since June, according to the trade ministry. Manufacturers plan to raise production 2.5 percent this month, and boost it 1.2 percent in February, a government survey of companies in the report showed.

“Industrial production will be on the recovery path for the coming months,” said Hiromichi Shirakawa, chief Japan economist at Credit Suisse Group AG in Tokyo. “Global industrial activities are picking up, but Japanese companies are not necessarily benefiting from that because of the yen’s strength.”

--With assistance from Minh Bui, Toru Fujioka, Andy Sharp, Mayumi Otsuma and Lily Nonomiya in Tokyo and Eunkyung Seo in Seoul. Editors: Chris Anstey, Ken McCallum

To contact the reporters on this story: Eleanor Warnock in Tokyo at; Keiko Ujikane in Tokyo at

To contact the editor responsible for this story: Paul Panckhurst at

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