More conflicting economic data from Japan, so much so that the government has revealed plans for what could be yet another stimulus spending package.
Just where the money will come from and what it will be spent on wasn’t clear yesterday.
The news came after industrial output slowed by a surprisingly large amount last month.
Japan’s industrial output rose 0.5% in October, the slowest pace in eight months.
As well, wages slid for a 17th successive month, according to another report yesterday.
And in a separate surprise, South Korean industrial production in October unexpectedly fell 3.8% from September. But it was still up 0.2% on a year earlier (11% up in the year to September).
Working day adjusted, industrial output was up 4.2%, the South Korean government said.
In Japan no such joy, with output year on year still off the pace; demand and consumption remains weak. Why, it’s no wonder.
Unemployment may be improving, but those workers employed are receiving less, working less and having to endure deflation, with headline consumer inflation down more than 2% in the past year (1.1% for core inflation). Retail sales are still falling, and wholesale prices are negative.
While industrial output rose for the eighth-straight month in October, it was much less than market forecasts for a 2.5% rise and less than the revised (lower) 2.1% rise in September.
It was also lower than the 3.1% rise forecast last month by the government after industry liaison.
While forecasts for higher production for November and December had economists and analysts saying the recovery will continue into the new calendar year, the size of the October fall came as a big shock.
It was no wonder an increasingly nervous Japanese government revealed the outline of another $US31 billion in stimulus spending hours after the IP figures were released.
If the yen continues at current ultra high levels of under 86 Yen to the US dollar, then the recovery could be throttled and Japanese companies forced to cut production as exports slow.
The Ministry for Trade and Industry (METI) said in its first report on October’s output that a 5.7% on-month rise in general machinery and a 2.7% rise in information technology equipment such as mobile phones pushed production higher.
Shipments rose 1.3%, while inventories fell 1.5% in October.
Encouraging analysts was the manufacturers’ outlook for the rest of the year, with an expected 3.3% increase in production in November and 1.0% in December.
The November forecast is up from a 1.9% rise in last month’s report.
METI said that if those forecasts are met, the data will show a 5.0% on-quarter gain in the October-December period.
But to put the performance in some sort of context, October output was 15.1% down from that in October 2008, when output was already starting to slow.
From now on figures for output, exports and imports will increasingly start looking better because they will be compared to 2008 and early 2009 monthly figures when everything collapsed.
Japan’s wages slid for a 17th month in October, extending their longest losing streak in six years and adding to evidence consumer spending will be subdued even as the job market improves.
The long slump in wages started in April-May of last year, well before the crunch became a recession.
Figures out yesterday from the Japanese Labor Ministry show monthly wages (including overtime and bonuses) fell 1.7% in October from a year earlier.
That long fall has seen consumers cutting back spending, which has now fed into the deflationary impact of falling prices, meaning demand and output are under more downward pressure.
Overtime hours at manufacturers, which correlate closely with output, rose 1.9% in the month, the slowest rise since April, when the current rebound in output was strengthening.
But hours worked overall fell 4.3% on a year ago. Real wages rose 1.3% in the month, because of the impact of deflation.
The stimulus announcement also came as something of a surprise.
The government has mused about the need for more spending as a way of tackling deflation; the Bank of Japan has vowed to tackle it, without revealing concrete plans how it will do it.
In a speech yesterday, Bank of Japan Governor, Masaaki Shirakawa, acknowledged Japan is in deflation and said he is carefully monitoring foreign exchange levels.
He said the bank is ready to take steps as needed to maintain financial market stability.
There’s continuing talk in Tokyo political and business circles that the government wants to intervene in some way to halt the rise of the yen, but that won’t prove anything, merely make profits for canny speculators.
According to newsagency reports, the Japanese government needs to take "policy action in view of the strengthening yen and problems surrounding share prices" and plans spending of "no less than 2.7 trillion yen (USUS31 billion)" said Chief government spokesman Hirofumi Hirano.
At the weekend, Prime Minister Yukio Hatoyama ordered his cabinet to work out measures to cope with the strengthening yen and its impact on exports and the markets in a supplementary stimulus package expected in coming months.
Deputy Prime Minister Naoto Kan said the supplementary budget would include funds frozen from a package of the previous conservative government, which lost power in August elections, plus
