Aug. 29 (Bloomberg) -- Japan's factory production rose in July because of rising demand from the U.S., supporting a recovery in the economy as cool weather caused the steepest drop in household spending in seven years. Stocks and the yen rose. Industrial production rose a seasonally adjusted 0.5 percent from June, more than the 0.2 percent median gain forecast by 36 economists in a Bloomberg News survey. Spending by households headed by a salaried worker dropped a seasonally adjusted 6.9 percent in July, another report showed. Rising exports by Canon Inc., Tamron Co. and other manufacturers helped Japan double the pace of economic growth in the second quarter. Declining consumer spending, which accounts for more than half of the world's second-largest economy, won't derail Japan's recovery from its third recession in 12 years, economists said.
``Today's numbers show an acceleration in the economy led by exports,'' said Takuji Aida, senior economist at Merrill Lynch Japan Securities Co. ``Consumer spending is a cause for concern.'' The Nikkei 225 Stock Average rose 0.7 percent to 10,295.74 as of 11 a.m. in Tokyo as the government forecast production to rise 2 percent this month and 1.5 percent in September. Exporters have sparked a 35 percent rally in the Nikkei since the index dropped to a two-decade low in April. ``We raised our production levels in July to meet rising orders,'' especially from overseas, said Takahiro Yamaguchi, a spokesman for lens maker Tamron, which expects sales to rise 30 percent in the business year ending June 30.
U.S. Growth
The yen strengthened to 117.09 to the dollar at 11:42 a.m. in Tokyo from 117.32 late yesterday in New York. The yen has gained more than 2.9 percent against the dollar this month, making it the world's best performer. Exports to the U.S. and rising business spending fueled a 0.6 percent second-quarter economic expansion in real terms in Japan. The U.S. economy, the world's biggest, grew at an annual 3.1 percent pace in the second quarter, more than the 2.4 percent initially expected. Tamron said this week that profit more than tripled in the first six months of this year. Canon, the world's third-largest maker of digital cameras, this week said it will invest about 100 billion yen in its chip-making equipment division and add 15 percent more workers by March 2006. Increasing consumer spending in the U.S. will help Japanese exports. Orders for cars, televisions and other durable goods rose in the U.S. for a second month in July, and new home sales were the second highest on record, government statistics showed this week.
Cool Weather
Unseasonably cool and wet weather in July hurt sales of air conditioners, bathing suits and other summer items at Aeon Co. and other retailers. The cold spell has extended into August and threatens to dent consumer spending, which accounts for 55 percent of the economy. Retail sales fell 2.5 percent in July from June, a second month of decline, the Ministry of Economy, Trade and Industry said in a separate report today. From a year earlier, sales at supermarkets, department stores, restaurants and other retailers fell 3 percent, the 28th straight monthly decline. Unemployment in July was unchanged at 5.3 percent as the economy lost 200,000 jobs and the workforce shrank by 280,000 people, another report said. //www.bloomberg.com