Reuters | TOKYO | Mon Dec 28, 2009 | 12:38pm IST
Japan’s industrial output rose for the ninth consecutive month in November, driven by strong exports and domestic subsidies, but swelling inventories and falling wages threaten to end the longest climb in more than 12 years. Demand from the United States and Asia contributed much to last month’s 2.6 percent rise, government data showed on Monday, supporting the Bank of Japan’s view that the world’s second-largest economy will continue its moderate recovery next year. Economists say overseas demand should prevent a return to recession next year. However, declining wages and weak labour market may outweigh the effect of government subsidies on energy efficient goods, forcing manufacturers to curb output and start selling down inventories built up in anticipation of better sales.
“The latest data shows that Japanese makers of automobiles and home electrical appliances are still hiking their output thanks to the continuing effect of government stimulus as well as strong exports to Asia,” said Seiji Shiraishi, chief economist at HSBC Securities in Tokyo. “But a slowdown is still expected early next year as the effect of stimulus will likely fade.” Japan’s wages fell for the 18th consecutive month in November from a year earlier, in a sign that deflation, or persistently falling prices and incomes, was entrenched. This exposes the central bank to more pressure from the government to ease monetary policy further. Continue reading