TOKYO, May 29 - Japan's industrial production fell in April as manufacturers felt the chill from a slowdown in major export markets such as the United States and a continuing slump in domestic demand. Output at factories and mines fell a preliminary 1.2 percent from March on a seasonally adjusted basis, figures from the Ministry of Economy, Trade and Industry (METI) showed on Thursday. "With the global economy slowing, and especially with exports to Asia falling, the output figures are expected to remain sluggish," said Takeshi Minami, a strategist at UFJ Tsubasa Securities.
The figures follow recent data that suggested growth in Japan's economy, the world's second-largest, virtually stopped in the first three months of this year. Gross domestic product (GDP) was flat in the first quarter. Just as worryingly, exports -- one of the key props of the economy -- have slipped as demand for Japanese goods in Asia and the United States falls and a rise in the yen makes them more expensive. A METI official told reporters that the ministry has kept its assessment of industrial output unchanged from last month, saying it remained on a weak trend. METI forecast that output would rise 2.6 percent in May and rise 1.1 percent in June, but the official cautioned that forecasts tend not to be met, though he could not give a clear reason why.
WEAKNESS CONTINUING
"The outlook really depends on how exports do in the months ahead," said Naoki Murakami, an economist at BNP Paribas. "So far, the U.S. economy is not showing signs of recovery so I think this weak trend in Japanese output will probably continue through the summer." Adding to the problems are a poor outlook for the domestic economy and the effects of the SARS virus on economies in Asia, the destination for some 40 percent of Japan's exports. A poll by journalists of Japanese economic research bodies last week saw many forecasting a recession -- two consecutive quarters of negative growth -- this year.
The METI official said some companies had expressed concern over the effects of SARS on their businesses in the coming months, but none said it had actually affected business in April. Other analysts noted that inventories had fallen for the third straight month, indicating that companies are managing the slowdown well by adjusting output. "If inventories were rising at the same time, that would be really bad," said Toshikimi Kaneki, an economist at Sumitomo Trust and Banking. "The data underscores our view that corporations are simply very cautious about increasing output."
The April drop was in line with the median forecast from a poll of 20 economists conducted last week by journalists. Forecasts in the poll had ranged from flat to a drop of 1.5 percent, with only one respondent expecting unchanged output. In March, output had risen 0.1 percent. On a year-on-year basis, output rose 3.6 percent over April last year, though the growth rate fell for a third straight month.//