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By Daisuke Takato
Tokyo, Sept. 30 (Bloomberg) -- Japanese factory production rose less than expected in August and the government forecast a slowdown in the coming months as manufacturers anticipate falling orders from overseas.
Industrial production rose 1.6 percent from July, seasonally adjusted, after a 0.1 percent gain in July, a government report showed. That was less than the 2.3 percent median forecast in a Bloomberg survey of 21 economists. The government said growth will probably slow to 0.4 percent this month and 0.2 percent in October.
A slowing global economy is sapping demand for exports by companies such as Sanyo Electric Co., which accounted for half of Japan's 0.6 percent expansion in the second quarter, the first quarterly growth in more than a year. That puts the onus on Prime Minister Junichiro Koizumi's economic policy to rekindle growth in world's second-largest economy.
``Risks are rising that the recovery may end as exports fall,'' said Toshiyuki Hara, senior market economist at Mizuho Securities Co. ``Production alone won't be able to sustain the economy.''
Japanese stocks fell after a U.S. consumer confidence index declined to a 10-month low in September, underscoring concerns that demand for exports may wane. The decline was led by exporters such as Sony Corp. and Sanyo Electric.
The Nikkei 225 Stock Index was down 2.2 percent to 9320.10 at 1:29 p.m. Tokyo time. Sony shares fell 3.4 percent, and Sanyo Electric was down 4 percent.
Exporters are feeling the pinch from a slowdown in the U.S., Japan's biggest overseas market, where economic growth fell to an annual 1.3 percent pace in the second quarter from 5 percent in the first. The Dow Jones Industrial Average has fallen 20 percent this year, cutting consumer confidence.
Last month, manufacturers boosted production to replenish inventories that dropped to the lowest level in 13 1/2 years, even as exports fell for a third month.
Sanyo Electric Co., the world's biggest maker of digital cameras and mobile-phone batteries, cut its profit forecast for the six months ending today by 80 percent, citing the cost of job cuts and a global slump in demand for consumer electronics.
Shift Overseas
Sanyo is trying to cut the cost of making washing machines and refrigerators by shifting some of its production to China, where labor costs are a fraction of those in Japan.
Fuji Machine Mfg. Co., which makes automated assembly machines used in the electronics and car industries, widened its loss forecasts on falling overseas demand and price competition. It expects to post a group net loss of 4.9 billion yen ($40.3 million) for its fiscal year ending March 31, wider than its earlier 3.3 billion yen loss outlook.
At home, the Nikkei 225 Stock Average fell to a 19-year low earlier this month, and the unemployment rate is holding at a near- record 5.4 percent. That's curbing consumer spending, which accounts for 55 percent of Japan's economy.
Factory shipments rose 3.3 percent in August from July, while inventories fell 0.9 percent, today's Ministry of Economy, Trade and Industry report showed. The inventory ratio, which increases when stockpiles rise faster than shipments, rose 0.1 percent.