Strong demand lifts Japan industry
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Wage-earning household spending rose in January.
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TOKYO, Japan (Reuters) -- Japan's industrial output rose strongly in January, helped by robust demand for electronics goods, suggesting fast export-led growth in the final quarter of last year had maintained its momentum.
But the official forecast for output in the coming months was less exuberant, and other economic indicators released on Friday showed stubborn price deflation and a rise in the jobless rate.
Industrial production rose a seasonally adjusted 3.4 percent in January from a month earlier, the Ministry of Economy, Trade and Industry (METI) said.
Economists polled by Reuters last week had forecast, on average, a rise of 2.8 percent.
Richard Jerram, Tokyo-based chief economist for ING Asia, told CNN Friday that the "key dynamic" of the Japanese economy was that exports were very strong and were likely to stay that way.
Jerram said the year had started well, with an export-led recovery that would be buttressed by businesses increasing output to overcome low inventory levels.
"A strong reading in output growth of 3.4 percent suggests that productivity growth is continuing to be led by exports," said Kiichi Murashima, an analyst at Nikko Citigroup.
The figures are the latest evidence that the economy is pulling out of a decade of stagnation. The economy grew at its fastest pace in 13 years in October-December on strong demand for Japanese electronics, cars and steel in China and the United States.
Average spending by Japanese wage-earner households rose a real 3.4 percent in January from the same month a year earlier, suggesting a recovery may be taking hold in personal consumption, the largest but weakest part of Japan's economy.
Figures earlier this week showed retail sales picked up in January while small companies—the backbone of the economy -- felt the most optimistic about their prospects in three months.
"We have not changed our basic view that the economy is recovering steadily," Economics Minister Heizo Takenaka told a news conference.
Nikkei above 11,000
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Tokyo's Nikkei is above 11,000 in Friday afternoon trade.
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Investors drew cheer from the latest upbeat news on the Japanese economy, pushing the stock market's benchmark Nikkei average above 11,000 for the first time in a month.
But Takenaka struck a note of caution, saying job conditions remained severe after a slight rise in the unemployment rate in January to 5.0 percent from December's 4.9 percent.
Economists also pointed to other signs that the recovery still has a way to go.
METI forecast manufacturers' output -- a key component and close proxy of overall industrial production -- would fall 4.1 percent in February and rise 0.7 percent in March.
"Although the January figures were strong, output growth will have decelerated in the January-March quarter," said Takehiro Sato, an economist at Morgan Stanley in Tokyo, though he said the economy was likely to maintain momentum due to strong retail sales and spending.
"So GDP (gross domestic product) on the whole will not slow down as sharply as industrial output," Sato said.
Deflation also remains a problem, with the core nationwide consumer price index (CPI), excluding volatile fresh food prices, falling 0.1 percent in January from a year earlier and 0.7 percent from a month earlier.
One issue is the strength of the yen against the dollar, which makes Japanese goods more expensive in the United States, Japan's largest single export market.
Japanese authorities have repeatedly acted against the yen's rise, spending over 27 trillion yen ($246.5 billion) since January 2003 to try to hold it down, and have breathed a sigh of relief now that the yen has started to decline.
The dollar is trading at 109.54 yen Friday afternoon, up from a low of 105.21 on February 11.
"From the medium-term perspective the market is reversing its excesses and that is appropriate for stability," Zembei Mizoguchi, vice finance minister for international affairs, told reporters on Friday.
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Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
