Revised Data Shows Japan's Factory Output Grew 0.6% In February, Rebutting Previous Reports Of 0.1% Decline

 
on April 15 2013 5:12 AM

Japan’s industrial output rose by 0.6 percent for the third straight month in February, according to revised final data released by the Ministry of Economy, Trade and Industry. The numbers indicate that the world’s third-largest economy is heading for a recovery.

Initial factory output data released by the ministry earlier this month had shown an unexpected fall of 0.1 percent in February, against analysts’ estimate of a 2.5 percent increase. But the adjusted data METI released Friday by METI put Japan’s industrial production, which measures the total inflation-adjusted value of output from manufacturers, mines and utilities, up 0.6 percent month-on-month in February, from 0.3 percent in the preceding month.

The capacity utilization index rose 0.7 percent in February vs. the previous month, to 86.6, Reuters reports.

A weaker yen and a surge in share prices helped manufacturers increase production activity, indicating that Shinzo Abe government’s radical monetary easing policies have begun to translate into economic growth.

Japan's GDP remained unchanged in the fourth quarter, recovering from the economic decline of the previous two quarters. The government is predicting a 2.5 percent GDP growth for fiscal year 2013.

Japan is battling deflation, falling exports and an investment slump, forcing the newly elected Shinzo Abe government to resort to aggressive monetary measures to stimulate growth. In addition to increasing public spending, the Abe government adopted export-friendly monetary policies that led to the sharp depreciation of the domestic currency. 

New BOJ Governor Haruhiko Kuroda, an aggressive supporter of Abe’s monetary easing policy, in the first week of April announced several  measures aimed at pulling the Japanese economy out of a decade of deflation. He has set a goal of getting to 2 percent inflation within two years. In a speech addressing the central bank's branch managers Monday, Kuroda reiterated this vow, saying the Japanese economy has bottomed out and signs of improvement are visible in prices and economic performance.

However, Japan's trade partners decry the monetary easing policies, fearing a sharp depreciation in yen will lead to a currency war. So far this month, the Yen has depreciated against all 16 of its major trading peers, after BoJ on April 4 announced a slew of measures to rein in deflation, including doubling monthly bond purchases. 

At a meeting of G-20 finance ministers scheduled for this week in Washington, Japan will likely be urged to refrain from policies that would drive the yen down further. The U.S. Treasury in a press release echoed that view, saying Japan should delay monetary easing measures to defeat deflation. 

 

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