Japan factory output
unexpectedly rises, economy still in low gear
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[May 31, 2016]
By Leika Kihara
TOKYO (Reuters) - Japan's factory
output unexpectedly rose in April as a series of earthquakes in the
southern part of the country appeared to have had minimal impact on
production, offering some signs of hope for an economy squeezed by
weak exports and consumption.
Household spending also fell less than expected in April and job
availability hit a 24-year high, a relief for Prime Minister Shinzo
Abe who is expected to delay a scheduled sales tax hike next year to
avoid dealing a hammer blow to a fragile economic recovery.
"The effect on output from the earthquakes may linger and inventory
levels remain high. But the chance Japan can avert a big slump in
second-quarter GDP has risen," said Harumi Taguchi, principal
economist at IHS Global Insight.
Factory output rose 0.3 percent in April from the previous month,
confounding market forecasts for a 1.5 percent drop and following a
3.8 percent gain in March, data by the Ministry of Economy, Trade
and Industry showed on Tuesday.
The better-than-expected data triggered a brief rebound in the yen
that pushed the dollar off its one-month high against the Japanese
currency.
Manufacturers surveyed by the ministry expect output to rise 2.2
percent in May and increase 0.3 percent in June, suggesting that
industrial production has bottomed out.
Japanese policy makers have been fighting a battle to fire up the
world's third-largest economy, but massive fiscal and monetary
stimulus over the past three years have failed to stoke sustainable
growth or inflation.
SIGNS OF HOPE
The earthquakes in Kumamoto, southern Japan, hit only a small
portion of auto output with other sectors left largely unaffected.
Machinery equipment output rose in a sign of pick-up in capital
expenditure, the data showed.
But some analysts warn of lingering external headwinds such as
sluggish emerging market demand that is expected to keep any rebound
in economic activity modest at best.
"We can be relieved somewhat about the effects of the Kumamoto
earthquakes. On the other hand, output has been weak due to global
economic situations. That part hasn't changed much," said Hidenobu
Tokuda, senior economist at Mizuho Research Institute.
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An engineer makes an arm rail for residential buildings inside a
metal processing factory at an industrial zone in downtown Tokyo,
Japan, March 22, 2016. REUTERS/Yuya Shino
"There are some positive moves (in the global market), but emerging markets are
still slowing down and weakness remains in U.S. production, too."
In a glimmer of hope, separate data showed household spending fell 0.4 percent
in April from a year earlier, much less than a 1.4 percent decline projected by
analysts.
Japan's jobless rate was steady at 3.2 percent in April and the jobs-applicants
ratio rose to 1.34, the highest level since November 1991, data showed on
Tuesday.
Japan's economy narrowly averted recession in the first three months of this
year and analysts expect only a modest rebound in the current quarter as
sluggish global demand and tame wage growth weigh on exports and consumption.
Abe, well aware of the risks, has told ruling party officials that he plans to
postpone next year's sales tax hike to ensure Japan plays its part to fend off
risks of a global economic downturn.
(Additional reporting by Minami Funakoshi; Editing by Shri Navaratnam)
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