Japan factory output has biggest fall on record
TOKYO – Japan's contracting economy got a slew of bad news Friday when government figures showed that industrial production plunged by its biggest margin on record in November, the jobless rate jumped and household spending fell.
Output at the nation's manufacturers tumbled 8.1 percent from October, the largest drop since Tokyo began measuring such data in 1953, as Japan's automakers and others slashed production to cope with slowing global demand. A government survey predicted further declines of 8 percent in December and 2.1 percent in January.
"Exports and industrial production are falling so extraordinarily quickly that it almost defies analysis," said Richard Jerram, chief economist at Macquarie Securities in Tokyo.
The drop in factory production is nearly double the previous biggest decline of 4.3 percent in January 2001, according to the Ministry of Economy, Trade and Industry. Earlier this week, trade data showed that exports plunged a record 26.7 percent in November.
Many companies, including big names like Toyota Motor Corp. and Sony Corp., have announced plans to cut production and workers. The yen's recent surge has also dealt a huge blow to the world's second-largest economy by eroding exporters' overseas earnings.
The job cuts are already being reflected in a higher unemployment rate, which rose to 3.9 percent in November from 3.7 percent in October, the Ministry of Internal Affairs said. That's still below the 4.2 percent reached in August.
The ministry said 2.56 million people were unemployed in Japan in November, an increase of 100,000 from a year earlier.
Part-time and temporary workers have suffered the bulk of job cuts so far. The Ministry of Health, Labor and Welfare said Friday that given current company plans, 85,000 such workers will have lost their jobs between October and March, compared to about 3,300 permanent employees.
The largest portion of such job cuts were in Aichi prefecture of central Japan, where Toyota and many of its part makers are based. Layoffs of salaried employees is rare in Japan, where lifetime employment is a tradition.
Consumers are also holding back. Retail sales fell 0.9 percent in November from last year, the third straight monthly decline.
And average monthly household spending dipped 0.5 percent from a year earlier, for the ninth decline in a row. Still, the drop was smaller than expected, beating the 3.6 percent decline forecast by a Kyodo News survey. Household spending is a key indicator of consumer spending, which makes up more than half of Japan's gross domestic product.
Inflation, meanwhile, eased. Core consumer prices — which excludes volatile fresh food prices — rose 1 percent after a 1.9 increase in October.
As Japan's economy weakens, government officials have warned that deflation, or steady price declines, is a possibility next year. Japan suffered through bouts of deflation from 1999 to about 2006, as it recovered from previous economic downturns.
Investors shrugged off the bevy of negative numbers. The benchmark Nikkei 225 stock average rose 1.6 percent to 8,739.52.
"Industrial output is highly volatile, and given the current state of the global economy, investors were not surprised by the plunge in November," said Kazuki Miyazawa, market strategist at Daiwa Securities SMBC Co. Ltd.
Japan's economy is already in recession. In the third quarter, it shrank 1.8 percent at an annual pace, worst that first thought.
The outlook for manufacturers is particularly grim. If dire forecasts for the next two months of industrial production hold, factory output will have fallen 20 percent from the start of October through January 2009.
Output by automakers fell 15 percent from October and 25 percent from a year earlier. Electronic manufacturers cut output 12 percent compared the previous month and 25 percent from the same month last year.
Economists say that while the outlook for the near-term remains bleak, a modest recovery in demand and production may begin to surface in mid-2009, as governments around the world begin to implement stimulus measures announced in recent months.
"We haven't see the light at the end of the tunnel yet, but we should be seeing it in a few months," said Takuji Okubo, an economist at Merrill Lynch.
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