Japan's output off less than expected

By staff and wire reports

TOKYO, Japan -- Japanese industrial production fell in October, the second month of decline in a row, new numbers showed on Thursday

But the 0.3 percent drop from the month before was better than expected. It was also an improvement on September's showing, a 2.9 percent drop, the Ministry of Economy, Trade and Industry reported.

The relative warmth of the figure was giving Japanese stocks a firm underpinning on Thursday. They were largely unfazed by a U.S. stock drop overnight and the possible collapse of Enron Corp.

The Nikkei index rose in the first hour of trade, though the index was losing ground as the day wore on. It was down 0.64 percent at 10,556.73 by the morning close.

Warmth partly explained by September fall

Economists had expected a 0.8 percent fall in industrial production for October. Though heartened by Thursday's figures, experts noted they were partly explained by the size of the previous month's fall.

The index is still down 11.9 percent from last year. But Junichi Makino, senior economist at Daiwa Institute of Research, said the figures showed some parts of Japan's economy have sunk as low as they're going.

"This is somewhat better than the market consensus, and the IT sector seems to be bottoming out in terms of output," he told Reuters news service.

"We are likely to see conditions in nonmanufacturing sectors like the service industry deteriorate, while the manufacturing sector is hitting bottom."

The report noted that industrial production remains on a downward trend. A high level of inventories remains a persistent worry.

Manufacturing output, one of the main components of the industrial output numbers, will fall 1.0 percent in November, METI predicted. But the ministry expects a 0.8 percent rise in December.

Jobless rate and GDP not likely to be rosy

But there's little bright news on Japan's economic front. It posted a surprisingly big decline in retail sales for October on Wednesday, a 4.9 percent drop that was the seventh straight down month.

Japan is likely to get a dose of bad news on Friday, when the unemployment rate is due. It is expected to rise from an already record 5.3 percent.

The rising jobless rate and wages that are beginning to weaken have cut into consumer confidence, which had held up relatively well.

Japan's fourth recession in a decade will almost certainly be made official when the third quarter Gross Domestic Product figures come out next month.