Japan industrial output logs record fall
Written on December 26, 2008
Export-reliant Asian economies showed more signs of weakness on Friday, with Japan’s industrial output diving at a record pace and South Korea warning it faces an “unprecedented crisis” as global demand wilts.
Even the once unstoppable Chinese economy is feeling the strain, with companies recording a sharp slowdown in profit growth in the first 11 months of the year.
On top of Japan’s steep fall in industrial output in November, core consumer inflation fell faster than forecast last month, putting the shrinking economy on course for a spell of deflation next year.
The grim outlook could push the Bank of Japan to implement unorthodox monetary easing measures as it has little room left to cut interest rates after reducing them to 0.10 percent last week.
But Japan’s Economics Minister Kaoru Yosano said he doubted that any so-called quantitative easing by the Bank of Japan would directly lead to an increase in loans to companies to get the economy moving again.
Facing the worst international economic environment in more than eight decades, Yosano said his government would act flexibly on possible additional spending measures if conditions deteriorated further.
“We cannot rule out the possibility that Japan and other parts of the world may face even worse economic conditions,” Yosano told Reuters in an interview.
Fears about possible deflation in Japan next year weighed on the yen, which fell in thin trade versus both the euro and the dollar payday loans.
But Japanese stock markets, long inured to dire prognoses and weak data, shrugged off the grim outlook, with the Nikkei average rising 1.6 percent to a six-week closing high.
MSCI’s measure of stocks elsewhere in the Asia-Pacific region added 0.1 percent, but is heading for a loss of more than 50 percent for 2008.
FALLING OFF A CLIFF
What started last year as a meltdown in the U.S. mortgage market has quickly spread across the globe, claiming some of Wall Street’s top firms, causing hundreds of thousands of job losses and costing trillions of dollars in stimulus and rescue packages.
With much of the developed world in recession and emerging economies quickly losing steam, many economists think Japan’s export-oriented economy could go through one of its sharpest contractions ever this quarter and next.
“Production is falling off a cliff,” said Naoki Iizuka, senior economist at Mizuho Securities. “The Japanese economy is unlikely to bottom out until October-December next year as output is expected to remain very weak until then.”
Industrial output fell 8.1 percent in November from a month earlier, posting the largest fall on record and exceeding a median market forecast for a 6.8 percent drop.
Filed in: technology.