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Japanese production plummets

PRODUCTION at Japanese factories fell by a record 10 percent last month and jobs proved increasingly hard to find, showing that Japan's worst recession since World War II is deepening.

Annual core consumer inflation evaporated, government data showed yesterday, as cheaper oil drives the world's second-biggest economy back towards deflation.

Factories forecast a further drop in output this month although a drop in inventories offered a glimmer of hope for the manufacturing sector.

Grim recruitment data and a slump in household spending, though, showed that the pain first felt by exporters was spreading across the economy.

"The downturn led by manufacturers may ease after the first half of this year," said Takeshi Minami, chief economist at Norinchukin Research Institute. "But it will gradually spread to non-manufacturers, making Japan's economic gloom a long one."

The economic woes and political infighting that is delaying government stimulus efforts have taken the yen to four-month lows.

Employment data for January showed that new job offers fell 18.4 percent from a year earlier, while the ratio of jobs to applicants hit a five-year low of 0.67, meaning that there were only two jobs for every three applicants. The tough times prompted households to cut their spending by 5.9 percent in January from a year earlier.

The yen has slid nearly 12 percent from a 13-year peak of 87.10 per US dollar but Finance Minister Koaru Yosano said that the yen's retreat might not offer much relief to exporters given the global slump in demand.

Rising utility bills prevented an expected drop in the core consumer price index in January, but economists said that it was only a matter of time before core prices, which exclude volatile fresh food but include oil, began sliding.

The Bank of Japan says that it expects two years of falling prices but economists debate whether it will take the form of chronic deflation - where price falls lead shoppers to hold back, pushing prices down further.


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