Japan Output Slumps for Fifth Month as Exports Tumble

Japanese industrial production fell for a fifth month in February, the longest losing streak since 2001, as exports collapsed.

Factory output declined 9.4 percent from January, when it plummeted a record 10.2 percent, the Trade Ministry said today in Tokyo. Inventories fell an unprecedented 4.2 percent.

Companies surveyed said they will increase production in March and April as they begin to replenish stockpiles they managed to get rid of even as demand evaporated. Manufacturers worldwide are cutting inventories, a sign that output may pick up later this year, providing relief for a global economy that is contracting for the first time in six decades.

“Production cuts may already be bottoming out,” said Shinichiro Kobayashi, a senior economist at Mitsubishi UFJ Research and Consulting Co. in Tokyo. “We should remember that that doesn’t necessarily mean overseas demand is already recovering.”

The yen traded at 98.15 per dollar at 10:16 a.m. in Tokyo from 98.08 before the report was published. The currency is heading for its worst quarter since 2001 as the world’s second- largest economy deteriorates faster than the U.S. and Europe. The Nikkei 225 Stock Average fell 1.2 percent.

Japan’s exports plunged a record 49.4 percent in February from a year earlier as sales of cars and electronics dried up. Toyota Motor Corp., forecasting its first net loss in more than five decades, plans to cut thousands of jobs and slash domestic production by half this quarter.

Tankan Survey

Sentiment among the nation’s largest manufacturers has fallen to its lowest level in more than 30 years, economists predict the Bank of Japan’s Tankan survey will show on April 1. The country’s largest firms plan to cut investment by 12 percent next fiscal year, the biggest pullback since at least 1983, economists predict the survey will show.

Prime Minister Taro Aso is preparing his third stimulus package since October to counter the slump. Finance Minister Kaoru Yosano said on March 22 that a plan of as much as 20 trillion yen, double the total amount pledged since October, is “not out of line” as the economy heads for its worst recession since 1945.

“The longer this stretches out, the harder the domestic economy is going to be hit,” said Martin Schulz, senior economist at Fujitsu Research Institute in Tokyo. “The government really needs to come out with another package.”

Spending Billions

Governments around the world are spending billions of dollars to spur domestic demand as global trade seizes up. Economists say a Japanese recovery hinges on whether a combined $1.4 trillion of spending in the U.S. and China, the country’s two biggest markets, is enough to revive demand for its cars and electronics in the second half of the year.

There are signs a recovery may be stirring in the U.S., Japan’s biggest market. U.S. orders for durable goods rose in February for the first time in seven months. Inventories of long-lasting durable goods fell for a second month and new home sales increased for the first time since July.

In Japan, the drop in inventories adds to evidence that the worst of the manufacturing slump may be over. Companies said they would increase production 2.9 percent this month and 3.1 percent in April, today’s survey showed.

Nippon Steel Corp. said last month output should improve next quarter because customers have used up their stockpiles. Nissan Motor Co., Japan’s third-largest automaker, said on Feb. 26 it will raise domestic production next month.

“Companies have succeeded, as you can see in today’s data, at cutting inventories back,” Richard Jerram, chief Japan economist at Macquarie Securities Ltd. in Tokyo, said on Bloomberg Television. “They’re starting to move production back more into line with demand, which is still depressed but obviously going to be a stronger level than the January- February period.”