Chips, electronic devices boost Japan manufacturing

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TOKYO: Japan’s factory output expanded again in October, data showed on Monday, boosted by production of memory chips and electronic devices, in a rare bright spot for the recession-hit economy.

Economists were generally upbeat on the 1.4 percent expansion in activity—the second consecutive monthly rise—and said it signaled Japan’s second recession in as many years would likely be short lived.

“The second straight rise in industrial production indicates that the economy returned to growth this quarter,” research house Capital Economics said in a commentary.

Retail sales data were also stronger than expected, offering a glimmer of hope after Tokyo on Friday published a string of mostly weak data—the first major figures since news that the world’s number three economy had slipped back into recession.


A key inflation gauge showed prices fell in October from a year ago, while spending by households also dropped in a double blow for Prime Minister Shinzo Abe’s high-profile growth blitz, dubbed Abenomics.

The weak figures came despite signs of a tight labor market, with the headline unemployment rate at a two-decade low of 3.1 percent.

However, the relatively upbeat factory output data published missed market expectations for a 1.8 percent rise and Japan’s industry ministry was cautious about the pickup.

A survey released with the figures cautioned that output would likely rise just 0.2 percent in November and then contract 0.9 percent in December.

Factory output is making “one step forward and one step back,” the ministry said.

The pickup was largely driven by demand for semiconductor chips and other electronic devices that Japan ships abroad, analysts said, while manufacturers work down their inventory levels.

Demand for Japanese-made IT and electronic parts tends to pick up in the second half of the year, said SMBC Nikko economist Junichi Makino.

“Industrial production as a whole is gradually bottoming out,” Makino said.

Earlier this month, official figures showed that Japan’s gross domestic product shrank 0.2 percent in the July-September period, or an annualized contraction of 0.8 percent, marking the second straight quarterly decline.

Tokyo is compiling an extra budget to counter the downturn while the Bank of Japan (BoJ) is expected to unleash further monetary easing over the coming months.

The economy dipped into a brief recession last year after consumers tightened their belts following an increase in Japan’s consumption tax, which dealt a blow to signs that Abe’s bid to spur the once-stellar economy was working.

That downturn spurred the BoJ to sharply increase its already massive bond-buying program—a cornerstone of Abenomics—effectively printing money to boost lending.

AFP

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