Japan industrial production falls for 3rd month in a row in August, amid slowing global demand

By Tomoko A. Hosaka, AP
Wednesday, September 29, 2010

Japan factory output down for third straight month

TOKYO — Japan’s factory output fell for the third straight month in August as cooling global demand led companies to cut production, adding to pressure on the central bank to do more to weaken the strong yen.

Industrial output fell 0.3 percent from the previous month, following a 0.2 percent decline in July, the Ministry of Economy, Trade and Industry said Thursday. Industries contributing to the retreat included general machinery and iron and steel.

The factory production figure, which fell far short of Kyodo News agency’s average market forecast of a 1.1 percent increase, is another piece of evidence that country’s export-driven recovery faces growing headwinds.

Companies, particularly exporters, are increasingly nervous about a persistently strong yen and slowing overseas demand. Analysts say the recent string of weak economic indicators is likely to convince the central bank introduce new monetary easing steps when it meets next week.

Nintendo Co. on Wednesday slashed its annual earnings forecast by more than half and warned of sharply slower sales. The gaming giant, which survived last year’s recession in better shape than other Japanese manufacturers, partly blamed the yen for its recent woes.

Nintendo had counted on the dollar trading around 95 yen. The dollar dived to 83 yen levels this week to its weakest point since the Japanese government intervened in currency markets Sept. 15 for the first time in six years.

Companies surveyed by the ministry expect output to keep falling in the months ahead. They forecast a 0.1 percent fall in September and a 2.9 percent drop in October.

“Industrial production appears to be flat and is likely to be weak,” the ministry said.

Goldman Sachs economist Chiwoong Lee described the auto sector as in the “vanguard of forthcoming decline.”

Along with softer overseas demand, the Japanese government’s eco-car subsidies, which had bolstered auto sales, will expire at the end of the month. Inventories of consumer durables are also rising, he said.

Shipments fell 0.5 percent, while inventory rose 0.7 percent, the ministry said.

In the central bank’s “tankan” survey released Wednesday, companies said they expect business sentiment to decline markedly toward the end of the year. Trade figures earlier this week confirmed that export growth slowed for the sixth straight month in August.

Prime Minister Naoto Kan unveiled a new 915 billion yen ($10.9 billion) stimulus package earlier this month, and more money looks to be on the way after the Cabinet draws up an extra budget for this fiscal year.

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