Japanese industrial output jumped 5.9 per cent in May, matching April's biggest gain in half a century, as car and electronics production pulled out of a deep slump but the outlook remains murky with the effects of government stimulus expected to wear off.
Manufacturers forecast a further 3.1 per cent rise in June and a tepid 0.9 per cent increase in July, but even then, production would still be about 22 per cent lower than a year earlier.
"Output has been making big gains since February as manufacturers try to make up for overshoots in inventory cuts last year, but final demand is still weak and we expect output to dip again once inventory has been restocked," said Junko Nishioka, chief economist Japan at RBS Securities.
"Japan's economy won't bounce back in the true sense until the global economy, and especially the US economy, recovers. And that won't be until the second half of this year or early next year."
Japanese factories can expect little help domestically, with rising unemployment and weak retail sales pointing to tepid domestic spending.
Inventories have dropped for five months in a row as the collapse of US investment bank Lehman Brothers last September sent Japan's key export markets plunging, prompting huge production cuts.
Auto makers, in particular, have since put back many of the factory shifts they cut as governments around the world stimulate car buying to try to restore the economy.
Car production jumped 24.8 per cent in Japan in May with inventories rising for the first time in four months, while electronic parts production rose 10.5 per cent.
Reuters