Slowdown in demand hits Japan's economy
By Tomoko A. Hosaka |
June 30, 2010, Wednesday
|
Print Edition
Print Edition
JAPAN'S economic recovery faltered in May as moderating export demand dented factory output, household spending fell and the jobless rate unexpectedly rose for a third straight month.
Industrial production dipped 0.1 percent from the previous month - the first decline in three months, the government said yesterday. Shipments overseas fell 1.7 percent.
Lower output from auto makers such as Toyota Motor Corp and Honda Motor Co dragged the index south, reflecting softening overseas demand. Factories also made less machinery used for semiconductors and flat-panel displays, according to the Ministry of Economy, Trade and Industry.
"Production momentum is slowing, and with the index coming in below expectation for a fourth month in a row, it seems to be doing so sooner than expected," said Goldman Sachs economist Chiwoong Lee in a note to clients.
The government predicts output to rebound 0.4 percent in June and 1 percent in July - notably smaller gains than in March and April.
The results point toward weaker growth in the world's second-biggest economy, which has relied on a rebound in exports to underpin recovery. Brisk overseas demand, particularly from Asia, drove annualized economic growth of 5 percent in the January-March quarter.
But that momentum is starting to cool as governments roll back stimulus measures and focus instead on controlling spending and debt. Data last week showed that while export growth is still robust, it has slowed every month since February.
World leaders who gathered for the Group of 20 meeting in Toronto pledged on Sunday to slash government deficits in most industrialized nations in half by 2013, despite warnings from United States President Barack Obama and others that overly aggressive austerity measures could derail the global recovery.
Japan's Prime Minister Naoto Kan, who has to cut debt, has a more immediate concern. With upper house elections on July 11, he must convince voters that his party can lead the way to growth and fight deflation.
Industrial production dipped 0.1 percent from the previous month - the first decline in three months, the government said yesterday. Shipments overseas fell 1.7 percent.
Lower output from auto makers such as Toyota Motor Corp and Honda Motor Co dragged the index south, reflecting softening overseas demand. Factories also made less machinery used for semiconductors and flat-panel displays, according to the Ministry of Economy, Trade and Industry.
"Production momentum is slowing, and with the index coming in below expectation for a fourth month in a row, it seems to be doing so sooner than expected," said Goldman Sachs economist Chiwoong Lee in a note to clients.
The government predicts output to rebound 0.4 percent in June and 1 percent in July - notably smaller gains than in March and April.
The results point toward weaker growth in the world's second-biggest economy, which has relied on a rebound in exports to underpin recovery. Brisk overseas demand, particularly from Asia, drove annualized economic growth of 5 percent in the January-March quarter.
But that momentum is starting to cool as governments roll back stimulus measures and focus instead on controlling spending and debt. Data last week showed that while export growth is still robust, it has slowed every month since February.
World leaders who gathered for the Group of 20 meeting in Toronto pledged on Sunday to slash government deficits in most industrialized nations in half by 2013, despite warnings from United States President Barack Obama and others that overly aggressive austerity measures could derail the global recovery.
Japan's Prime Minister Naoto Kan, who has to cut debt, has a more immediate concern. With upper house elections on July 11, he must convince voters that his party can lead the way to growth and fight deflation.
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