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Monday, March 29, 2010

Japanese Production Takes a Breather

Bloomberg details:

Japan’s industrial production retreated in February, snapping an 11-month winning streak that helped to secure a recovery from the country’s worst postwar recession.

Factory output declined 0.9 percent from January, when it rose 2.7 percent, the most in eight months, the Trade Ministry said today in Tokyo. The median estimate of 24 economists surveyed by Bloomberg News was for a 0.5 percent drop.

The slide is unlikely to last as Asian demand for the country’s electronics and machinery continues to fuel exports, Junko Nishioka, chief economist at RBS Securities Japan Ltd. in Tokyo, said before the report was published. Factory output and exports have yet to return to their peak set two years ago, and the recovery remains plagued by deflation.
While today's 0.9% slide wasn't a surprise to the upside like yesterday's consumption release, it also wasn't that unexpected considering the huge jump we saw in January (industrial production is still up considerably from December's figure).



Putting it all together...

The good news is production is up considerably from lows. The bad news is how far things fell (i.e. can businesses operate profitably at these new levels). Relying on the United States for recovery is a concern, but the benefit of being situated near a red-hot China allows room for optimism.

Source: METI.Go