Japanese industrial output slid for the fifth month in a row in February as weak exports weighed on an economy mired in its worst recession since World War Two, but there were tentative signs of recovery.
Manufacturers said they expect output to rise in March and April and reported a record fall in inventories, showing that rapid production cuts in response to the global financial crisis had helped reduce huge stockpiles of unsold goods.
Inventories rose quickly at the end of last year as drastic falls in exports left Japan's big car and tech companies scrambling to cut factory shifts and lay off contract workers.
Forecasts of a recovery in production of about 3 per cent in each of the next two months was seen as a sign that output may have reached a low, although no rapid rebound was expected.
“Industrial production will probably bottom out in the second quarter and start rising in the third quarter,” said Kyohei Morita, chief economist at Barclays Capital.
“Manufacturers are bottoming out by cutting costs and jobs, which has a negative impact on households and non-manufacturers. We need fiscal stimulus for these parts of the economy, and the government may announce something specific at the G20 meeting.”
The government plans to map out a new stimulus package ahead of a G20 summit in London this week, with support planned for households to boost an economy suffering rising unemployment.
Industrial output fell 9.4 per cent in February, a slightly larger decline than the median market forecast for a 9.2 per cent decline, after dropping a record 10.2 per cent in January.
Hit by plunging global demand and weak consumption at home, Japan's export-reliant economy shrank 3.2 per cent in the fourth quarter, its fastest decline since the 1974 oil crisis and twice as fast as the US and euro zone economies.
Analysts expect Japan's economy to keep shrinking in the first half of the year - meaning a record five quarters of contraction - but some see brighter signs in export markets.
New US orders for long-lasting goods rose in February for the first time in seven months and there are signs that sharp falls in exports from Asia to the US may be easing.
Shares in Asian chip makers have rebounded from rapid falls on an improving outlook for the battered sector and Tokyo's Nikkei share average rose 8.6 per cent last week.
But the Nikkei fell 4.5 per cent today, its biggest one-day fall in over two months, after a US autos task force rejected the turnaround plans of General Motors and Chrysler, sending Japanese automakers tumbling.
Reuters