Last updated: 11:21 / Thursday, 5 February 2015
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Investec: Japan Receives Industrial Output Boost

Investec: Japan Receives Industrial Output Boost

Japan's industrial output edged higher in December, suggesting the world's third-largest economy may be turning the corner after a recession brought on by a hefty sales tax hike. Data released last week showed manufacturing production increased by 0.3 per cent in December from a year earlier and by one per cent from the month before.

But inflation slowed to 2.5% from a year earlier, compared with 2.7% in November.

Tackling deflation

Prime Minister Shinzo Abe has made pushing prices higher the main focus of economic policies aimed at ending years of deflation that have discouraged corporate investment and hobbled growth. Japan returned to recession last year, shrinking in both the second and third quarters of 2014. The surprise slump prompted Mr Abe to call a snap election to renew his economic policy mandate, a poll that he won in December.

Now it seems the country’s mighty industrial base could be returning to health.

Flag of Japan

The Ministry of Economy, Trade and Industry said that, on top of the rise in production, there was also a 1.1% rise in shipments of goods compared with November and a 0.4% increase compared with a year earlier.

There was also a run-down in the inventories held by businesses, which shrank by 0.4% compared with November, suggesting a pick-up in demand.

The ministry said: “Industries that mainly contributed to the production increase are, first, electronic parts and devices, second, information and communication electronics equipment, and third chemicals, excluding drugs, in that order.”

It added: “Industrial production shows signs of increase at a moderate pace.”

Production forecast improves

The ministry published also its “survey of production forecast”, which it describes as “one of the useful economic indicators, which reflect changing business conditions and provide a view of where the economy is heading in the near future”.

The latest forecast found planned production this month was expected to be 6.3% higher than in December, but to be 1.8% lower in February than in this month.

The same survey in December forecast a 5.7% rise in production this month compared with December, so the expected level of output has risen by 0.6% points.