TOKYO: Japan’s factory output plummeted in February at its sharpest pace since the aftermath of the 2011 earthquake and tsunami disaster, government data showed Wednesday, the latest setback to efforts to rejuvenate the world’s third-largest economy.
Prime Minister Shinzo Abe has been trying for more than three years to pull Japan out of years of deflation, stagnant wages and weak consumer spending.
Unorthodox measures including a massive bond-buying program by the Bank of Japan have brought the yen down from record high levels and made Japan’s exports more competitive but that alone has not been enough to deliver consistent economic growth.
Gross domestic product contracted 0.3 percent in the last quarter of 2015, revised data showed earlier this month, marginally better than the first estimate in February but still a disappointment.
The Ministry of Economy, Trade and Industry said that industrial production fell 6.2 percent from the previous month, worse than a Bloomberg forecast of a 5.9 percent drop.
It was also the sharpest since a 16.5 percent fall in March 2011, when an earthquake and tsunami disaster devastated swathes of Japan’s northeastern coast and led to a disruption in global supply chains.
Analysts said the February result was hit by temporary factors including factory closures by top global automaker Toyota Motor and falling demand related to China’s Lunar Year holidays.
Harumi Taguchi, economist at IHS Global Insight, said the outlook remains weak because of “relatively high inventories” in factory warehouses.
“Weak demand and destocking could weigh on production over the near term,” she said.
The reading follows a flurry of grim economic data, including consumer inflation at zero in February, for the second straight month.
The result highlights the challenge Abe faces in pushing prices higher as energy prices fall and a higher yen drives down the cost of other imports.
Also weighing on the economy are government plans to further raise Japan’s consumption tax from the current eight percent to 10 percent next year, in a bid to cope with a snowballing national debt as the population declines.
After approving a record budget of 96.7 trillion yen ($860 billion) on Tuesday, Abe reiterated he will go ahead with the plans to raise the sales tax even as influential economists including Nobel Prize winner Joseph Stiglitz call for a delay.