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TOKYO: Japan's industrial output rose for a third straight month, matching the fastest pace in 56 years, as the world's number two economy claws back from its worst recession on record, data showed Monday.
Japanese manufacturers moved swiftly to idle production lines after the global economic downturn sent their exports plunging. Having succeeded in reducing their bloated stockpiles, they are now ratcheting up output again.
Production rose 5.9 per cent in May from the previous month, matching April's revised growth, which was the strongest since a record 7.9 per cent increase in March 1953, according to the trade and industry ministry.
Market expectations had been for a slightly bigger increase of 6.9 per cent.
Compared with a year earlier, production was down 29.5 percent, underscoring the drastic measures taken by firms since the economic crisis erupted.
Output growth is expected to slow to 3.1 per cent in June and to 0.9 per cent in July, according to manufacturers' forecasts, the ministry said.
"Production has been rebounding sharply in response to earlier drastic cuts but the momentum is likely to slow in the months ahead," said Hiroshi Watanabe, an economist at the Daiwa Institute of Research.
"Exports are likely to rebound less sharply and so is production," he said, noting that demand is cooling for Japanese exports of raw materials to China and other Asian nations.
Production in May was largely boosted by higher output of automobiles, cellphones and electronic devices, which had seen a particularly sharp decline in demand due to the global economic slowdown.
Japan entered recession in the second quarter of 2008 as its heavy reliance on overseas markets as an engine of economic growth left it highly vulnerable to the fallout from the global economic crisis.
The Japanese economy suffered its worst contraction on record in the first quarter of 2009, shrinking at an annualised pace of 14.2 per cent.
Recent data have sparked hopes that the worst of the slump in exports and industrial production is now over, but analysts warn that any recovery is likely to be long and slow.
"Production was rebounding in a V-shape until June but will settle at a gradual rise from July," said Naoki Murakami, chief economist at Monex Securities.
Investors are now turning their attention to a closely watched survey of Japanese business confidence due out on Wednesday.
The Bank of Japan's quarterly "Tankan" survey is expected to show an improvement in sentiment among Japan's major manufacturers from a record low the previous quarter, helping to underpin improving investor confidence.
"Things are improving at a dramatic pace in Japan," Societe Generale's chief Asia economist, Glenn Maguire, wrote in a note to clients.
"In contrast to the general impression of Japanese manufacturers as lethargic conglomerates unable to respond quickly to an evolving economy due to consensus based decision making, the exact opposite is the case," he added.
"Japanese firms were amongst the first to cut production, wages, and working hours, and are now in a position to respond more flexibly to a rebound in external demand, even if it is soft."
- AFP/yt
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