Thursday, February 28, 2008

Industrial Production in Japan Drops, Risks Economic Slowdown

by Michelle Roberts

The industrial output of Japan dropped by double than estimated in January this year and this lowered stock prices on speculation that Japan’s economy might have to suffer a slowdown or even shrink for the first quarter of 2008. Economists estimate the yield to drop in January or March from the earlier quarter. Chief economist with Daiwa SB Investments Yasuhiro Onakado held that he expected a possible recovery in the industrial output to be poor in April-June and this will signal a warning to the Bank of Japan’s set-up of a positive system.

The economists further said that he thought that the Bank of Japan will have to cut rates at the middle of the current year. The industrial production dropped by 2.0% in January from December in the earlier year and the consensus market estimate was of a 0.8% drop. The Nikkei stock average of Tokyo slid by 1.3% which was weaker than the estimated calculation, however the Yen did not register a significant change when the figures were declared. The main element of Japan’s industrial production is the manufacturing output which expects its yield to drop further by 2.9% by February however it will gain by 2.8% in March and these figures are as per the ministry of economy, trade and industry which were announced on Thursday.

In case the production realizes according to the estimates in February and March, industrial production for the first quarter of 2008 will drop to 2.5% from its earlier quarter. This will be the highest quarterly fall since a 2.6% drop estimated for the last quarter of the year 2001, the ministry further added. Atsushi Mizuno, considered as one of the most hard-lined members of the Bank of Japan will be giving his speech on the economy to business leaders in Oita in the southern part of Japan. The markets will be intently watching what Atsushi Mizuno says about the economy in his speech. Senior economist at Dai-ichi Life Research Institute, Yoshiki Shinke, expressed that the production of the electronic devices almost nosedived and it is a matter of grave concern since the strength in this sector of industrial production was responsible for the total yield in the second half of the last year. The senior economist further said that the output is supposed to drop in January and March from its previous quarter.

Economists have expressed that the economy of Japan can experience a smooth phase in the first half of the current year as companies began to experience the effects of the slowdown led by US, however exports for the country have so far been steady. In a separate statistics retail sales were reported to have risen 1.5% in January from a year earlier as against the average estimated for a flat reading of economists. This is a sign which means that personal consumption is going on steadily even if food and energy prices are growing. The volatile financial markets, concerns about the US economic recession and gathering gloominess over the economic outlook of Japan is resulting into opinions that the central bank will maintain the rates or can even bring them down in the current year.

 

 

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