Japan output sees first fall in six months

TOKYO, Oct 28, 2011 (AFP) - Japan's industrial production fell for the first time in six months in September, government data showed on Friday, as the nation's exporters grapple with slowing global demand and a soaring yen.

Output sank 4.0 percent from the previous month, the first drop since production was hit by the March earthquake and tsunami that left 20,000 dead or missing, triggered a nuclear crisis and crippled supply chains for Japanese industry.

While an upbeat survey of producers by the trade ministry said output was expected to rise 2.3 percent in October and 1.8 percent in November, analysts warned these forecasts could be revised lower.

September's decline was more severe than expectations of a drop of around 2.0 percent, as production of large passenger cars, machinery for semiconductor products and cellular phones fell, the data showed.

The health of the world's third-largest economy is under scrutiny with exporters facing a soaring yen that eats into repatriated profits and makes goods less competitive, as softening demand prompts fears of a global recession.

This and the impact on production of flooding in Thailand that has crippled supply chains for hundreds of Japanese firms -- not reflected in Friday's data -- is seen as undermining producers' efforts to restore output levels.

Analysts said expectations of rising output in coming months could be under threat as the situation in Thailand looked unlikely to improve soon.

Planned production rises for October and November "would make up for the recent drop", noted Naoki Murakami, chief economist at Monex brokerage.

But he added: "As the production plans released this time are believed to have hardly taken into account the impact of floods in Thailand, the plans of production increases are likely to be revised down."

Murakami added that "an economic slowdown worldwide blunted a recovery in exports", forcing companies to be less sure in their forecasts that they can continue increasing production until the year-end.

As it looks to safeguard the economic recovery from the impact of a strong yen and the global slowdown, the Bank of Japan (BoJ) on Thursday announced further easing measures to help put downward pressure on the currency, which nevertheless hit a fresh postwar high against the dollar of 75.66 overnight.

Japan's finance minister Jun Azumi on Friday again threatened government intervention in financial markets, with officials complaining that speculators are using Europe's debt crisis as an excuse to push the currency higher.

In a separate report, the BoJ on Thursday forecast deflationary pressures to continue through at least fiscal 2013, with annual price growth remaining below 1.0 percent, the level it considers to represent price stability.

Figures on Friday showed Japan's core consumer prices rose 0.2 percent in September from a year earlier, in line with market expectations.

The core consumer price index, which excludes volatile food prices, has risen in part due to an increase in energy prices, but Japan in general is mired in a deflationary trend with domestic demand remaining weak.

Other data showed that Japan's jobless rate stood at 4.1 percent in September, compared with expectations of 4.4 percent, as the government added to its survey areas in northeast Japan hit by the March earthquake and tsunami.

The reading represented a drop from 4.3 percent in August, even though it was the first time since the disaster that the monthly survey included three prefectures hardest hit by the March 11 disasters.

Household spending remained soft, declining 1.9 percent from a year earlier, although this was better than expectations of a 3.3 percent fall.

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