Japan factory output slumps as recovery stumbles

AFP FILE PHOTO

TOKYO, Japan — Japan’s factory output declined in November, official data showed Monday, falling back after two months of gains as the economy struggles to mount a recovery.

The disappointing data — industrial production fell 1.0 percent from a month earlier — comes after separate figures last week showed  persistently weak inflation and household spending.

The numbers underscore Tokyo’s challenge in conquering years of deflation and tepid growth with the prime minister’s “Abenomics” policy blitz.

Monday’s decline in factory output was worse than market expectations for a 0.4 percent contraction.

Output is taking “one step forward and one step back,” the ministry of economy, trade and industry said in a statement.

The government forecast stronger figures this month and in January.

“But we should not be so optimistic,” said Yusuke Shimoda, an economist at Japan Research Institute.

“One big concern is a slowdown in the Chinese economy, which is pressuring Japanese companies.”

On Friday, Japan said that core inflation, excluding volatile fresh food prices, ticked up 0.1 percent in November.

It was the first gain in five months but remains way below the Bank of Japan’s 2.0 percent target, as officials struggle to convince cautious firms to usher in big wage hikes to stir spending.

In November, household spending fell 2.9 percent from a year ago, the third monthly decline.

Japan’s economy saw a slight uptick in the July-September quarter, rising 0.3 percent — and reversing an earlier forecast of a contraction that had risked putting the country into recession for the second time in as many years.

But a lackluster global economy, marked by the slowdown in China and weakness in emerging markets, is also posing challenges to the recovery.

Tokyo has approved an extra spending budget to stimulate the economy.

A falling price spiral in Japan for years put consumers off buying in the hope of getting goods cheaper down the road, denting firms’ expansion and hiring plans. That has weighed on growth in the wider economy.

This month, Japan’s central bank announced an unexpected tweak to its 80 trillion yen ($665 billion) annual asset-buying scheme  in a bid to power a recovery in the economy.

The central bank’s stimulus, launched more than two years ago, is a cornerstone of Prime Minister Shinzo Abe’s attempt to kick start the long-lumbering economy.

BoJ chief Haruhiko Kuroda said he was keeping a close eye on how much cash firms hand out in winter bonuses, and in spring wage negotiations.

Policymakers hope that putting more cash in shoppers’ wallets will spur spending and move Japan closer to the bank’s inflation target.