Tags: japan | economy | recovery | asia

Japan's Output, Retail Sales Slump, Dampening Recovery Prospects

Image: Japan's Output, Retail Sales Slump, Dampening Recovery Prospects

Monday, 28 Dec 2015 08:16 AM


Japan's factory output fell for the first time in three months in November and retail sales slumped, suggesting that a clear recovery in the world's third-largest economy will be delayed until early in 2016.

While manufacturers expect to increase output in coming months, the weak data casts doubt on the Bank of Japan's view that an expected pick-up in exports and consumption will help jump-start growth and accelerate inflation toward its 2 percent target.

Industrial output fell 1.0 percent in November from the previous month, more than a median market forecast for a 0.6 percent decline, data by the trade ministry showed on Monday.

Separate data showed that retail sales fell 1.0 percent in November from a year earlier, more than a median forecast for a 0.6 percent drop, as warm weather hurt sales of winter clothing.

"We're finally seeing signs of pick-up in exports, but the economy has yet to make a clear turnaround," said Takeshi Minami, chief economist at Norinchukin Research Institute.

"There's a risk consumption will remain sluggish and prevent economic growth from picking up," he said.

Japan's economy narrowly dodged recession in July-September and analysts expect only modest growth in the current quarter, as consumption and exports lack steam.

Some analysts warn the economy may suffer a contraction in October-December if household spending remains weak. Taro Saito, senior economist at NLI Research Institute, expects consumption in the current quarter to have risen less than a 0.4 percent quarter-on-quarter increase in July-September.

BOJ

Wary of soft growth, the government plans nearly $800 billion in record spending in the budget for the fiscal year that will begin on April 1.

The BOJ has signaled readiness to expand stimulus if risks threaten Japan's recovery prospects. The central bank fine-tuned its stimulus program on Dec. 18 to ensure it can keep up or even accelerate its money-printing.

While sluggish emerging market demand dims the export outlook, analysts expect output to gradually increase early in 2016 as automakers ramp up production of new models.

Manufacturers surveyed by the trade ministry expect to increase production by 0.9 percent in December and raise it by 6.0 percent in January.

Many analysts share the BOJ's view that output is bottoming out, though some doubt manufacturers will boost production as much as they now project.

"There may be expectations that factory output will improve early next year. But it's uncertain whether the forecasts can be realized," said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.

© 2017 Thomson/Reuters. All rights reserved.

   
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Japan's factory output fell for the first time in three months in November and retail sales slumped, suggesting that a clear recovery in the world's third-largest economy will be delayed until early in 2016.
japan, economy, recovery, asia
411
2015-16-28
Monday, 28 Dec 2015 08:16 AM
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