Bloomberg News

Japan-to-Korea Output Misses Estimates as Taiwan Cools: Economy

April 29, 2013

Japan Production Misses Estimates Amid Weakness in Global Demand

Jangup System Co. employees inspect mascara containers on the production line for manufacturing cosmetics containers at the company's factory in Yongin, South Korea. Photographer: SeongJoon Cho/Bloomberg

Japanese and South Korean industrial output was less than estimates in March and Taiwan’s first-quarter growth was half the forecast pace as weakness in global demand limits recoveries in Asian economies.

In Japan, production climbed 0.2 percent from the previous month, the trade ministry said in Tokyo today. That was less than the median 0.4 percent forecast in a Bloomberg News survey of 27 economists. South Korea’s output fell 2.6 percent, the biggest decline in a year, a separate report showed. Taiwan’s gross domestic product rose 1.54 percent.

Today’s data add to signs of a cooling global economy after U.S. gross domestic product rose less than forecast in the first quarter and China reported an unexpected slowdown. While Japan is already rolling out unprecedented monetary easing, the latest numbers may fuel calls for South Korea’s central bank to cut interest rates.

“Overseas demand gathered momentum in the past few months, but the pace of growth is moderating a bit now,” said Junko Nishioka, chief economist at Royal Bank of Scotland Group Plc (RBS) in Tokyo and a former Bank of Japan official. “Shipments of cars to the U.S. are slowing.”

The MSCI Asia Pacific Index (MXAP) climbed to the highest since June 2008 amid speculation that central banks will extend stimulus measures. The benchmark was up 0.8 percent as of 12:22 p.m. in Tokyo.

In the U.S., the Federal Reserve will consider renewing its commitment to bond-buying at a two-day meeting that starts today, while most economists in a Bloomberg survey predict the European Central Bank will cut interest rates this week.

Flagging Momentum

In South Korea, recovery momentum is weakening as the euro area economies struggle and the U.S. and Chinese economies expand at a slower-than-forecast pace, according to a finance ministry statement today. Reduced working hours at Hyundai Motor Co., the nation’s biggest carmaker, dragged down output last month. Prolonged yen weakness is a risk for exports, the ministry said.

“The Bank of Korea may need to adjust its rosy assessment of the second half,” said Jun Min Kyoo, a Seoul-based economist at Korea Investment & Securities Co. “We need an interest-rate cut in May.”

While Japan’s output was less than forecast, economist Nishioka said that the nation’s recovery is being sustained. The March jobless rate fell to 4.1 percent, the lowest since 2008, and household spending rose by the most in nine years, separate reports showed today. The government raised its assessment of output to say that “production is moving to a gradual recovery.”

Abe’s Campaign

The Bank of Japan has pledged unprecedented monetary easing as part of Prime Minister Shinzo Abe’s campaign to defeat 15 years of deflation. A slide in the yen is boosting the outlook for Japanese exporters in coming months, while adding to challenges for their rivals in other Asian nations.

In Taiwan, growth was less than analysts’ median forecast of 3.1 percent and the 3.72 percent gain in the previous three months. The island’s export orders and industrial output unexpectedly fell in March.

“Weak March data suggested demand worldwide is tepid,” Ma Tieying, a Singapore-based economist at DBS Group Holdings Ltd., said before the island’s GDP release.

Around the world, the U.S. will today release consumer confidence data, while Germany gives numbers for retail sales and unemployment.

In Japan, “manufacturing will continue to pick up in the second quarter, but at a slower pace than in the first quarter,” said Masamichi Adachi, senior economist at JPMorgan Chase & Co. in Tokyo. “However, momentum should gain each quarter from the second half of the year as public spending kicks in, the weaker yen supports exports, capital spending increases, and a rise in summer bonuses leads to higher consumption.”

To contact the reporters on this story: Andy Sharp in Tokyo at asharp5@bloomberg.net; Cynthia Kim in Seoul at ckim170@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net


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