Japan's Industrial Output Rises on Autos, Chips

Dec. 28, 2004; Bloomberg reported that Japanese industrial production rose in November for the first month in three as auto companies and makers of semiconductors boosted output to meet demand in the U.S. and China.

Production rose a seasonally adjusted 1.5 percent from October, the Ministry of Economy, Trade and Industry said today in Tokyo. The median forecast of 33 economists surveyed by Bloomberg News was for a 1.8 percent gain.

Manufacturers including Sony Corp. are raising production after cutting stockpiles, helping sustain a recovery in the world's second-largest economy as consumer spending slows. Spending by households headed by a salaried worker declined 0.9 percent in November from the previous month, another government report showed today.

``It's clearly a turning point for industrial production,'' said Glenn Maguire, an economist at Societe Generale Australia Ltd. in Sydney. ``There has been a slowing in the economy in production and inventory corrections in some key sectors. I think we are getting close to that being corrected.''

The yen traded near its strongest in three weeks against the dollar in Asia after the industrial production report. The yen was at 103.19 per dollar at 11:36 a.m. in Tokyo, from 103.03 yesterday in New York, according to electronic foreign exchange trading system EBS.

Household Spending

Household spending fell for a third month as consumers cut back on purchases of clothing, fresh food and furniture. The trade ministry also said today that retail sales declined 0.6 percent in November from the previous month.

Japan's jobless rate fell to 4.5 percent in November, the lowest since January of 1999, from October's 4.7 percent as the economy shed jobs and people left the workforce, the bureau said. A total of 450,000 people gave up looking for work in November, while the economy shed 150,000 jobs.

Demand for workers increased as fewer people sought work. Japan's job-to-applicant ratio rose to 0.92, its highest level since December of 1992.

Wages are falling in part because companies including Ito- Yokado Co., the nation's second-largest retailer, are employing more part-time workers to control costs. Average wages, which have declined for the past eight years, have risen in just four of the past 45 months, according to government statistics.

U.S., Asia

Ito-Yokado plans to raise the portion of part-time workers at its stores to 77 percent by the end of February from 72.5 percent.

Sony, the world's second-biggest consumer electronics maker, will invest about 60 billion yen to boost semiconductor output at two plants on Japan's southwestern island of Kyushu.

Sony, which was Japan's sixth-biggest chipmaker in 2003 according to market researcher Gartner Inc., will make chips used in liquid crystal displays, digital cameras and other electronic devices, it said in a statement on Dec. 21.

Toyota, the world's largest automaker by market value, said on Dec. 21 it expects overseas sales to rise 10 percent in 2005 as it releases new models and demand increases in the U.S., Asia and Europe. The company, which predicts record earnings for the fiscal year ending March 31, plans to increase production in Japan by 3 percent to 4.58 million units in 2005.

``Automakers like Toyota want to rev up the economy by releasing new models and attract spending,'' Toyota President Fujio Cho said last week when the carmaker released its output forecast.

Retail sales in the U.S., Japan's biggest overseas market, unexpectedly gained for a third straight month in November. Retail sales in China, Japan's second largest market, last month grew 13.9 percent to their second-highest level.

Economists surveyed by Bloomberg this month raised their U.S. growth forecast for this quarter, expecting the economy to expand at a 3.8 percent annual rate compared with an earlier 3.5 percent rate estimate in November.

Exports

Exports accelerated in November, gaining 13.4 percent from a year earlier, led by autos and steel. Overseas shipments grew at their slowest pace in more than a year in the third quarter.

Exports from Nippon Steel Corp., JFE Holdings Inc. and other Japanese steel makers surged 18.5 percent in November, the first gain in four months as demand in Southeast Asia rose.

The gain in output in November comes after a typhoon and earthquakes disrupted production in October. Typhoon Tokage, the most destructive in a decade, claimed 61 lives, while a series of earthquakes and aftershocks in Niigata prefecture killed at least 37 people, destroying roads and rail lines.

``October was depressed by the earthquake and by some of the typhoons as well,'' said Richard Jerram, chief economist at Macquarie Securities Ltd. in Tokyo.

Production fell in September and October in part because of electronic device makers trimmed output as companies pared inventories that had reached their highest level since August 2001.

Electronics

Japan's production of electronic goods will probably gain 2.9 percent next year on burgeoning demand for flat-panel televisions, DVD recorders and other equipment, the Japan Electronics and Information Technology Industries Association said in a report on Dec 21.

Growth in production of semiconductors and other electronic devices will slow to 3.3 percent compared with a 9.5 percent gain forecast for this year, the industry group said.

Japanese core consumer prices, which exclude fresh food, fell 0.2 percent from the year before the statistics bureau also said today. The median forecast of 28 economists surveyed by Bloomberg was for a decline of 0.1 percent.