Japan witnesses contraction in factory output in February

Prime Minister Shinzo Abe

Prime Minister Shinzo Abe

Official data showed that Japan witnessed a surprising contraction in factory output in February. The released figures highlighted a huge task ahead of the new government of the world’s third economy. The government will have to work by the sweat of its own brow to get out of economic stagnation and deflation.

Disappointing Figures

On the 29th of March, official information was released showing that Japan witnessed an unexpected decrease in factory output. According to data, Japan saw its industrial output contract approximately 0.1 percent in February from January and it was the unexpected  first month-on-month drop since November 2012. The figures on the Japan’s factory output released by the Ministry of Economy, Trade and Industry were indeed surprising as they were significantly down from analysts’ estimates of a 2.6 percent increase.

In addition, the separate data indicated that Japan recorded a drop of 0.3 percent in core consumer prices in February from a year earlier. A drop in the index was smaller than analysts’ projections of a 0.4 percent slump. Because of the drop, the Bank of Japan will certainly have to introduce more aggressive easing measures if it wants to reach the 2 percent inflation target. Moreover,  the index  surprisingly slumped for the fourth consecutive month in  February. Without a doubt, the decline in core consumer prices was shocking as it came despite an outstanding 15 percent dip in the value of the yen. The weakening yen strengthened Japan’s exports which had suffered from the strong yen and the territorial dispute over the Senkaku islands. As for the unemployment rate, it climbed subtly to around 4.3 percent, compared to a 4.2 percent noted in January.

According to the official forecast prepared by the Ministry of Economy, Trade and Industry, Japan’s factory output will increase approximately 1 percent in March.

Challenging task ahead of BoJ

The figures on Japan’s industrial output and core consumer prices were released just about few days before a BoJ meeting which is due to begin in the first week of April. Haruhiko Kuroda, the new governor of the Bank of Japan, will lay down his plans regarding monetary easing and other issues as well. It is widely expected that Haruhiko Kuroda, who was appointed by Prime Minister Shinzo Abe, will take steps much in line of the strategy of the Japan’s government which aims to boost the country’s economy.

Moreover, all steps of the BoJ will be aimed at beating deflation through introducing more aggressive policy measures. Prime Minister Shinzo Abe wants to back the Japan’s economy which has been struggling for years.  And indeed, the latest decisions led to weakening of the yen which in turn strengthened Japanese exporters, including Toyota Motor Corp. or Sony Corp.

Even though the economic situation of Japan still is more or less unpredictable, analysts remain moderate optimistic about the future as the country witnessed modest growth in the last three months ended December 2012 and the latest decisions of the government are bearing fruits.

Avatar
Anna Domanska
Anna Domanska is an Industry Leaders Magazine author possessing wide-range of knowledge for Business News. She is an avid reader and writer of Business and CEO Magazines and a rigorous follower of Business Leaders.

Recent Posts

Hyundai commits $7.4 billion in US investment by 2025

Hyundai commits $7.4 billion in US investment by 2025

South Korea’s Hyundai Motor Co., announced on Thursday it will soon start manufacturing electric vehicles in the United States. The automaker plans to produce EVs, upgrade produc
2 days ago
US inflation report of 4.2 percent raises concerns

US inflation report of 4.2 percent raises concerns

The US reported the highest inflation recorded in the last dozen years at 4.2 percent in April, riding on government stimulus packages, improved energy prices, better spending and
2 days ago
Aon – Willis asset disposal aims to ease approval of $30 billion merger

Aon – Willis asset disposal aims to ease approval of $30 billion merger

Aon Plc and Willis Towers Watson have agreed to sell $3.6 billion worth of assets to rival Arthur J. Gallagher & Co. in a bid to appease European competition regulators over th
3 days ago
Roblox declares Q1, reports $387 million revenue as bookings increase

Roblox declares Q1, reports $387 million revenue as bookings increase

Roblox, the hugely popular online gaming platform, reported its first-quarter earnings after becoming a listed company. Its revenue more than doubled as the videogame company benef
4 days ago
Weak US job report results in volatile market

Weak US job report results in volatile market

A weak job report resulted in a record close on Friday for the US stocks. The US labor department’s monthly non-farm payrolls report revealed employers hired 266,000 new workers
5 days ago
Star and Blackstone launch bids to buyout Australia’s Crown Resorts

Star and Blackstone launch bids to buyout Australia’s Crown Resorts

A bidding war has broken out between Australian casino company Star Entertainment Group and US private equity investor Blackstone Group over Crown Resorts, Australia’s bigges
5 days ago