— Adds Economist Comments, Background Throughout
— Japan Feb Industrial Output +0.4% M/M Vs Jan +1.3% M/M
— Japan Feb Industrial Output MNI Poll Median Forecast -0.3% M/M
— Japan Industrial Output Posts 4th Straight M/M Rise in Row
— METI Forecast Index: Japan March Output +1.4% M/M, April -1.3%
— METI Repeats View: Japan Output Continues to Show Upward Move
— METI Adds: Need to Watch Quake Impact on Output
— Japan Feb Industrial Output +2.8% Y/Y Vs Jan +3.5%
TOKYO (MNI) – Japan’s industrial output rose in February for a
fourth straight month on a recovery in demand for passenger cars,
another sign that the economy at that time was continuing its move out
of the temporary dip seen in late 2010, data from the Ministry of
Economy, Trade and Industry released on Wednesday showed.
However, output is likely to turn sharply downward starting in
March due to the effects of the devastating March 11 earthquake and
tsunami that damaged or destroyed factories and electrical generating
capacity in northeastern Japan, economists have warned.
Production at the nation’s factories and mines rose a seasonally
adjusted 0.3% in February from the previous month, bringing the
industrial output index to 96.4, the highest since October 2008, when
the index stood at 100.1.
The February headline figure was stronger than most economists
expected, with the median forecast in a Market News International survey
calling for a 0.3% fall.
METI’s survey of firms’ forecasts at that time showed that overall
production was expected to rise 1.4% m/m in March — revised down from
the 1.9% rise estimated in the previous survey — and would decline by
1.3% in April (first estimate). However, a ministry official said that
the outlook survey did not take account of earthquake effects.
Based on the latest data and the outlook for the next two months,
METI maintained its assessment, saying that industrial production is
“continuing to show an upward movement.”
But the ministry said that the impact of the earthquake needs to be
watched closely.
“Japan’s economy was on the mend, at least before the March 11
earthquake, as the slew of data have shown,” said Takeshi Minami, chief
economist at Norinchukin Research Institute.
Government data showed recently that Japan’s unemployment rate
dropped unexpectedly to a two-year low of 4.6% in February as Japan Inc
rushed to hoard workers in light of an upturn in global demand, while
the nation’s total exports rose 9.0% in February, the 15th straight
year-on-year gain.
Data from the Ministry of Health, Labour and Welfare also showed
that the ratio of job offers to job seekers at government placement
offices rose to a seasonally adjusted 0.62 in February, the highest
since January 2009, from 0.61 in January in 2011.
Ahead of the earthquake, automakers, which carry a heavy weighting
in the index, were preparing to boost their production thanks to brisk
demand outside of Japan. They had slashed output in the preceding months
after the government ended its subsidy program in September.
In February, output of transportation equipment — mostly
automobiles — rose 3.4% from January following a 7.5% rise in the
previous month.
This was led by a 2.1% rise in production of large passenger cars
with engine displacement of over 2000cc, a 7.8% gain in the assembly of
small passenger cars with engine displacement of over 660cc but less
than 2000cc, and a 6.6% increase in output of mini-cars with engine
displacement of less than 660cc.
“But we now have to brace for a major downturn of nearly 10% in
industrial output in March from the February level, as the earthquake
wrecked major production facilities in the Tohoku region,” Norinchukin’s
Minami said.
The combined lost production of Japan’s eight passenger car makers
and four truck manufacturers is estimated at some 385,000 vehicles as a
result of the earthquake and tsunami, the Nikkei has reported.
The figure represents almost 5% of annual output, the business
daily said.
Toyota will cut production by about 140,000 units, while Honda
Motor Co’s production will fall by 46,600 vehicles, Nissan Motor Co’s
production is expected to slide by 42,000 and Mazda Motor Corp’s output
will decline by 31,000 units, according to the report.
“The devastated plants, combined by disrupted distribution
networks, and sharply reduced electrical power supply in eastern Japan
mean that industrial production activity will struggle throughout
April,” Minami said.
The government said last week that the massive damage inflicted on
Japan’s northeastern Pacific coast is estimated at up to Y25 trillion
($309 billion), making it the costliest natural disaster in the
country’s post-war history.
The official estimate, which was the first released after the
tsunami caused by the quake devastated fishing ports and farmlands, was
based on the assumption that 80% of existing buildings and factories in
the quake- and tsunami-hit zones of Iwate, Miyagi and Fukushima
prefectures in northern Japan were damaged.
The estimated damage would exceed the toll of around Y9.6 trillion
from the Great Hanshin Earthquake, which hit western Japanese port city
of Kobe on Jan. 17, 1995.
While the disaster has caused uncertainty over the prospects for
an economic recovery and an end to deflation, some analysts pointed to
bright spots as the government and private-sector are gearing up for
reconstruction.
“Japan will rebound strongly in the April-June quarter,” predicted
Takuji Okubo, chief Japan Economist at Societe Generale Corporate &
Investment Banking.
“This is no reason to believe that Japan will continue to languish.
History shows that a strong rebound has followed disasters and the
current situation is not an exception,” he said.
Societe Generale now expects Japan’s economy to shrink at an
annualized pace of 8.6% in real terms in the January-March quarter but
to rebound at an annualized 7.8% in the following quarter.
Electronics giant Hitachi Ltd will resume full operations at its
biggest factory complex in Ibaraki Prefecture next month, the Nikkei
reported on Wednesday.
On Tuesday, the company resumed operating 60% of its 260 most
commonly used machine tools, with the bulk of the remainder likely to be
up and running by the end of April, the business daily said.
Meantime, the Japanese government launched deliberations on details
of supplementary budgets for the reconstruction of the quake-hit areas
in northeastern Japan after the fiscal 2011 national budget was enacted
on Tuesday.
The first government supplemental budget will total Y2 trillion,
the Nikkei reported today.
The government will then roll out two or more additional budgets,
with the total extra spending possibly topping Y10 trillion, the report
said.
Other details from the latest data:
Shipments: February +1.7% m/m Vs January +0.6%, posting the fourth
straight monthly rise.
Inventories: February +1.5% m/m Vs January +4.0%, marking the third
straight m/m rise.
The inventory-to-shipments ratio: February -2.2% m/m Vs January
-0.2%.
tokyo@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4835 **
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