Japan Industrial Output Rose Less Than Forecast in December – Bloomberg

Japan’s industrial production rose
less than economists forecast, suggesting that a recovery in the
nation’s manufacturing sector is lagging a weakening yen.

Output rose 2.5 percent from November, when it declined 1.4
percent, the Trade Ministry said in Tokyo today. The median
estimate of 25 economists was for a 4.1 percent gain. Production
fell 7.8 percent from the previous year.

The smaller-than-forecast rise in production adds to the
challenges facing Prime Minister Shinzo Abe as he tries to pull
the economy out of recession, with exports falling for seven
months and consumer demand staying weak. The depreciating yen
and the government’s fiscal stimulus measures may help to
support corporate profits and stoke economic growth this year.

“The stimulus will probably start boosting the economy
from the second quarter,” said Masamichi Adachi, senior
economist at JPMorgan Securities in Tokyo and a former BOJ
official. “There will be a time lag until the weakening yen
increases export volume.”

The yen has depreciated more than 12 percent against the
dollar in the past three months, the most among 16 major
currencies tracked by Bloomberg. It was at 91.06 per dollar as
of 9:46 a.m. in Tokyo. The Nikkei 225 Stock Average (NKY) was down 0.3
percent today after gaining for the last 11 weeks.

While the ministry’s data showed that production of
transport equipment rose 6.9 percent, Japan’s three largest
automakers — Toyota Motor Corp. (7203), Honda Motor Co. and Nissan
Motor Co. — reported falling domestic production in December
from the previous month.

Semiconductor Machinery

Production of semiconductor manufacturing equipment surged
nearly 60 percent in the month, while output of electronic parts
and devices fell, the data showed.

A weaker yen makes products relatively cheaper in export
markets and boosts overseas earnings for Japanese companies such
as Toyota and Canon Inc. (7751) when repatriated.

Twelve analysts covering Toyota, Japan’s biggest car
manufacturer, have raised their earnings estimates for the next
fiscal year. The stock has the highest proportion of buy
recommendations in nearly five years, according to analyst
ratings tracked by Bloomberg.

Economy Minister Akira Amari said this week that the
effects of Abe’s 10.3 trillion yen ($113 billion) stimulus
package announced this month would begin to appear in April.

Economic Recovery

Japan’s gross domestic product shrank in the second and
third quarters last year and was forecast to fall in the three
months through December, according to the median estimate of
economists surveyed by Bloomberg News, with a return to growth
forecast this quarter. Manufacturers expect production to rise
2.6 percent in January and 2.3 percent in February, the data
showed.

Manufacturing in China, Japan’s biggest export market, is
expanding at the fastest rate in two years, bolstering prospects
that economic growth there will accelerate for a second straight
quarter.

Goldman Sachs Group Inc. last week raised its growth
forecast for Japan for next fiscal year to 2 percent from 1.2
percent. The bank also raised its six- and 12-month targets on
the Topix Index of stocks, saying the effects of Abe’s stimulus
measures are not yet priced in.

To contact the reporters on this story:
Keiko Ujikane in Tokyo at
kujikane@bloomberg.net;
Andy Sharp in Tokyo at
asharp5@bloomberg.net

To contact the editor responsible for this story:
Paul Panckhurst at
ppanckhurst@bloomberg.net