Japanese output slipped in February after a strong rise in January, but firm government forecasts for the coming months confirmed that an economic recovery is on track. Other government figures released on Tuesday showed Japan's job market as mixed, with a stronger economy helping to create jobs but company redundancy programmes meaning overall employment levels are not rising sharply. Industrial production fell 3.7 percent in February from a month earlier, slightly more than a median forecast of a 3.4 percent decline in a survey of 25 economists last week. The Ministry of Economy, Trade and Industry (METI) forecast manufacturers' output -- a key component and close proxy of industrial production -- would rise 0.5 percent in March and 4.2 percent in April. "Industrial production fell in February but this is in line with market forecasts and 3.7 percent is not so bad," said Mamoru Yamazaki, chief economist at Barclays Capital. "The more important figures are the production forecasts for March and April, showing a continuing increase in production in the new fiscal year."
Leading the way will be continued demand for digital products, along with forecast strong demand for new car models and general machinery, METI said. "We haven't heard many companies saying things were bad in February," a METI official told a briefing, noting that some companies were adjusting output and inventories ahead of new product releases from April, the start of Japan's business year. The forecasts will be good news for the government, helping to offset worries that the yen's strength against the dollar is hurting exporters, the driving force behind the recovery. The yen was around 105.50 per dollar on Tuesday, not far from a recent three-and-a-half-year high, prompting Japanese officials to warn that they will continue to intervene in the currency market to rein it in.
EXPORTERS COPING
"As we have said before, our basic policy is that foreign exchange rates should reflect fundamentals and move in a stable manner and that we should take action if the market strays from fundamentals," Finance Minister Sadakazu Tanigaki told reporters. Analysts said, however, that Japan's exporters seem to coping well with the strong yen. "I don't get the impression that the strong yen is doing any damage to industrial activity and the outlook for production is still positive for now," said Seiji Adachi, an economist at Credit Suisse First Boston. Part of the reason could be increasing signs that the recovery is trickling through to the biggest part of the economy -- consumer spending. Figures last week showed that Japanese households spent more in February and that retail sales rose. Consumers may be being tempted to spend a bit more by a feeling that employment conditions may be bottoming out, though not improving just yet. Japan's unemployment rate was 5.0 percent in February, unchanged from January and slightly above a median forecast of 4.9 percent in a poll last week. Unemployment reached a record high of 5.5 percent in January 2003 but has slowly declined since. "Job conditions remain tough, but there are signs of improvement," Economics Minister Heizo Takenaka told a news conference.
The number of people in employment in February rose to 62.09 million from 61.93 million in the same month a year earlier, but it was down from 62.21 million in January. The number of unemployed fell to 3.30 million from 3.49 million a year earlier but was up from January's 3.23 million. The jobs-to-applicants ratio in February was unchanged from the previous month at 0.77, meaning there were 77 jobs available per 100 job seekers. "A rise in unemployment was offset by an increase in the labour force, and total employment declined marginally to mark the first fall in three months," said Ryo Hino, an economist at JP Morgan. "Hence, the trend remains broadly stable, with signs of an upturn still tentative."///www..com