Japan factory output up

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JapanDeficit111 Reuters. A Japanese flag flutters in front of a shipping container area, at a port in Tokyo.

Tokyo - Japan's factory output rose a smaller-than-expected 0.5 percent in May from a month earlier after a 2.8 percent fall in April, data showed Monday.

The reading fell short of market expectations for a rise of 0.9 percent.

“Industrial production appears to be flat,” the ministry of economy, trade and industry said in a monthly report, leaving the overall assessment unchanged from its April report.

Industrial production covers output of consumer items such as cars and computers, as well as that of production equipment such as cranes, excavators, lathes and turbines.

A survey of manufacturers released with the data showed they expect factory production to fall by 0.7 percent on-month in June before turning up 1.5 percent in July.

Industrial output has shown healthy increases in the past year under the pro-business administration of Prime Minister Shinzo Abe.

But the market is watching to see whether the trend will be maintained following a sales tax increase in April.

Capital Economics said in a report “the rise in industrial production in May suggests that the sector is recovering from the weakness caused by the consumption tax hike”.

Manufacturing companies had stepped up output in the run-up to the tax rise to cope with a surge in demand.

Retail sales had got a strong boost ahead of the April 1 sales tax rise - Japan's first in 17 years - as shoppers made a last-minute dash to buy staples and big-ticket items such as cars and refrigerators.

But spending turned down after the hike, weighing on activity and exacerbating worries that the higher tax would weigh on consumer spending and a wider economic recovery.

Official data last week showed household spending plunged 8.0 percent year-on-year in May while retail sales slipped 0.4 percent.

The tax rise was seen as crucial for shrinking Japan's mammoth national debt, proportionately the worst among wealthy nations.

(Dow Jones Newswires contributed to this article) - Sapa-AFP



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