Industrial production grew 1.0 percent in January from December for the second straight monthly rise, backed by positive developments in global economic conditions and the weakening yen, the Ministry of Economy, Trade and Industry announced Thursday.
METI upgraded its basic assessment of production, saying it “has bottomed out and shows some signs of picking up.” The assessment was raised for two straight months for the first time since 1995, a ministry official said.
“As a background, global economies are ceasing to decline and (Japanese) exports are showing signs of picking up. . . . Business sentiment over the prospects has also improved because of the correction in the yen’s strength and rising share prices,” the official said.
The strong yen has been a concern for Japanese exporters, the driving force of the economy, as it erodes the value of their earnings when repatriated.
But the yen has weakened considerably against major currencies amid expectations generated by aggressive monetary easing pursued by Prime Minister Shinzo Abe.
The seasonally adjusted index of output at factories and mines stood at 89.7 against the base of 100 for 2005, METI said in a preliminary report.
Looking ahead, manufacturers polled by the ministry anticipated that output will increase 5.3 percent in February and 0.3 percent in March.
By sector, production by transport equipment makers advanced 6.8 percent in January, helped by firm demand for cars and automotive parts at home and abroad. Iron and steel makers also gained 6.6 percent.
“As a wide range of sectors are increasing production, such as transport equipment, iron and steel, and chemicals, I think we are observing a recovery trend,” said Haruka Kazama, an economist at Mizuho Research Institute.
As for the economy’s prospects, Kazama said the focus will be on how much exports will increase amid the yen’s devaluation, and how Abe’s economic policies, centering on drastic monetary easing and massive public works spending, will spur domestic demand.
” ‘Abenomics’ could positively affect production such as in the area of public work projects,” Kazama said.
The index of industrial shipments grew 0.1 percent to 90.4, while that of inventories was down 0.5 percent to 104.6.