Tokyo, Feb. 21 (Bloomberg) -- Economic activity in Japan fell to its lowest level in almost four years in December, a government report said today, hurt by slumping sales at companies such as McDonald's Holdings Co. (Japan) and NTT DoCoMo Inc. Japan's all-industry activity index fell 0.6 percent from November, seasonally adjusted, the Ministry of Economy, Trade and Industry said. Economists in a Bloomberg News survey expected a 0.2 percent drop, after a 0.8 percent fall in November. The index fell 1 percent in the fourth quarter from the third. The drop in the index runs counter to a report last week showing that the world's second-largest economy grew 0.5 percent in the fourth quarter, led by a surge in exports. Economists said the all-industry index shows that the domestic economy is slumping as companies cut jobs to reduce costs. ``What you see in the all-industry number is that the export- led growth hasn't spread to the rest of the economy,'' said Hitoshi Asaoka, an economist at Mitsubishi Research Institute. Mitsukoshi Ltd., Japan's second-largest department store operator, last month said it would cut 460 jobs, or 3.7 percent of its workforce, by February 2004. Mitsukoshi in October cut its full-year profit forecast 8.3 percent for the fiscal year ending Feb. 28 after first-half profit fell 16 percent. The No. 246 bond, which carries a 0.8 percent coupon and matures in 2012, rose 0.136 to 99.637 as of 11:28 a.m. Its yield fell 1.5 basis points to 0.84. A basis point is 0.01 percentage point.
Services Slump
The tertiary index, which encompasses service companies and accounts for three-fifths of the all-industry index, fell 0.7 percent in December, today's report showed. The decline, the fourth in a row, was led by wholesalers, retailers, restaurants, and transportation and communications companies. Shoppers are cutting spending after the jobless rate rose to an average 5.4 percent last year and wages fell 2.4 percent, both records. McDonald's Japan, the nation's biggest fast-food chain, had its first loss in 30 years for the year ended Dec. 31, because of a sales slump and the cost of closing unprofitable outlets, the company said last week. NTT DoCoMo Inc., Japan's biggest mobile phone service provider, this month said its customers spent 4 percent less in the three months ended December. It said it might fall short of its subscriber target for its high-speed wireless Internet cell- phone service in Japan, which it already lowered once in November by 75 percent.
Spending Slows
Consumer spending, which accounts for more than half of Japan's economy, rose 0.1 percent in the fourth quarter, slower than the 0.8 percent gain in the third, according to the government's gross domestic product report last week. Retailers, wholesalers and restaurants account for about a third of tertiary industries. From a year earlier, the tertiary index fell 1.3 percent, and it fell 1 percent in the fourth quarter. The all-industry index is used as a proxy for GDP because it adds industrial production, construction, agriculture and government spending to the tertiary index. It fell 1.3 percent in 2002, for the second straight year, and differs from GDP in that it doesn't include exports. //www.quote.bloomberg.com