RTTNews - Even as election results in Japan signal an end to the 5-decade old LDP rule, economic data released earlier in the day suggested that the Japanese economy may be moving towards stabilization, although the weak undertone persists. Japan's Industrial production continued to increase in July, although at a slower rate, while retail sales fell at a slower annual rate in comparison to the previous month.
Japan's industrial production increased on a monthly basis for the fifth consecutive month in July, and continues to show an upward movement, preliminary estimates released by the Ministry of Economy, Trade & Industry revealed Monday.
Industrial production was up 1.9% in July, a slower rate of growth compared to the 2.3% rise last month. Analysts were looking for a 1.4% increase. On a yearly basis, production fell 22.9% in July.
The industries that contributed to the monthly rise in July include transport equipment, steel & iron and other manufacturing. The commodities that recorded significant rises in production were large passenger cars, small passenger cars and large trucks.
The Ministry also reported that shipments for the month of July were up 2.3% from the previous month, showing an increase for the fifth consecutive month. Year-on-year, shipments dropped 22.1%.
The industries that mainly contributed to the monthly rise in shipments were transport equipment, steel & iron and fabricated metals.
Inventory decreased 0.2% from in July last month, a slower rate of fall compared to the 1.1% drop in June. Inventory slid 10.6% in July from the year-ago period.
The industries that mainly contributed to the decrease were electronic parts & devices, steel & iron and general machinery.
The inventory ratio fell 4.1% in July from the previous month, showing a decrease for the second successive month. However, on an annual basis, inventory ratio was up 20.3% in July.
According to the survey of production forecast, industrial production was expected to rise at a monthly rate of 2.4% in August, and 3.2% in September. Earlier, it was estimated that industrial production will rise by 3.3% in August.
Meanwhile, in a separate report released Monday, the Ministry announced that Japan's retail sales were down 2.5% in July compared to the year-ago period. Economists had expected a steeper 3.5% decline, following the revised 2.9% drop in June.
Of total retail sales, large retailer sales slipped 8.4% in July, making it the largest yearly fall recorded in 2009.
Overall commercial sales, which is the total of wholesale and retail sales, were down 24.2% year-on-year, recording a decrease for the tenth consecutive month in July. Of this, wholesale sales dropped 30%.
Falling commercial sales signaled at a decline in consumer spending amid record high unemployment, lower wages and a continuing deflationary economy, and with the effects of the government's stimulus packages sure to gradually fade, consumption of retail goods is likely to be lackluster for the foreseeable future.
Nevertheless, victory for the Democratic Party in the recently concluded elections is expected to have a substantial impact on Japan's weak economy, with several initiatives proposed by the party to aid the economic recovery, including plans to cut waste and rely on untapped financial reserves to fund reforms.
But with public debt rising towards 200% of gross domestic product, the democrats' plan risks the possibility of worsening Japan's overall fiscal health.
Deutsche Bank in a recent report noted that Japan has the highest gross government debt of any industrial country, at 172%. Considering the baseline version of the firm's simulation, Japan's government debt was forecast to grow at a rate of 3% per year, with the debt ratio spiraling above 500% of the GDP by 2050.
The report pointed out that the privatization of the present financing system, especially the proposed plan to privatize Japan Post, would isolate institutions closely linked to government from market-oriented situations, and put a check to rising government debt.
Although privatization exposes the government to the risk of having to pay higher interest, there was no other viable alternative to sustain the government's alarming debt levels. Postponement, or indeed failure of the privatization plan would deal a serious blow to Japan's reform effort, the report said.
For comments and feedback: contact email@example.com