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Japanese factory output jumps but prices remain comatose: ministries

AFP-JIJI, Kyodo

Factories put in a surprisingly strong performance in May to post the sharpest growth since December 2011, official data showed Friday, the latest good news for Japan’s economy as the government works to breathe new life into the perpetual laggard.

The figures, which showed industrial production jumped 2.0 percent in May from a month earlier, come as Japan’s trade picture improves, with exports rising on booming business with the United States and China.

Markets had been expecting a monthly factory output rise around 0.2 percent.

“Broadly speaking, I believe this indicates a gradual recovery,” said Yasuo Yamamoto, senior economist at Mizuho Research Institute. “But this month’s gains could be attributed to production of large machinery like turbines and boilers. So it could represent mainly temporary factors.”

While the output marked the fastest growth since a month-on-month rise of 2.0 percent was logged in December 2011, the Ministry of Economy, Trade and Industry maintained its basic assessment of production in the preliminary report, saying it has shown “signs of picking up at a moderate pace.”

The seasonally adjusted index of output at factories and mines stood at 97.8 against the base of 100 for 2010. METI changed the base year from 2005 when it released its revised report for April.

Meanwhile, separate figures also published Friday painted a more mixed picture of an economy still struggling to reverse years of growth-crimping deflation.

Consumer prices were flat in May, although a modest increase was seen in the metropolitan Tokyo area and the results were better than the fall in the previous month. The core consumer price index, excluding fresh foods, stood at 100.0 against the 2010 base of 100, the Internal Affairs and Communications Ministry reported.

A smaller drop in television prices helped lift prices, the ministry said.

The core CPI for Tokyo’s 23 wards, a key indicator of nationwide price moves down the road, rose 0.2 percent in June to 99.2 for the second straight monthly increase.

As for the nationwide CPI, TV prices fell 9.6 percent in May, smaller than the 16.4 percent drop the previous month. Certain other durable goods, including air conditioners, also registered smaller month-on-month declines.

Separate data showed Japan’s average monthly household spending dropped an inflation-adjusted 1.6 percent from a year earlier to ¥282,366, posting the first decline in five months, due partly to a decrease in vehicle purchases and communication fees.

The ministry left its basic assessment unchanged from the previous month, saying that household spending is “picking up.”

The income of salaried households increased 1.5 percent to an average ¥422,724, rising for the third month in a row.