Japan’s industrial production expanded an unadjusted 5.5 percent in 2004, marking a second straight yearly rise, the government said Friday.

The increase was partly attributed to strong demand for digital home appliances in the first half of the year.

This marks the highest growth since the production index registered a 5.7 percent rise in 2000, the Ministry of Economy, Trade and Industry said in a preliminary report.

The index of output at mines and factories stood at 100.2 against the base of 100 for 2000.

The index of industrial shipments grew 5.3 percent to 102.4, marking a second consecutive yearly rise, while that of industrial inventories slipped 0.7 percent to 87.6, down for a fourth year.

Despite the strong annual figure, output has lost steam in recent months.

The index of industrial production fell 0.8 percent in the October-December period from the previous quarter, marking a second straight quarterly drop.

In contrast to the September-December period, the production index gained 0.5 percent in the January-March period and 2.6 percent in the April-June period, it said.

Still, many economists believe the current slowdown in production will not be as serious as in past recessions and production will pick up in the second half of this year as inventory is adjusted in the information-technology sector.

“Production was strong in the first half of 2004 in line with the recovery trend, but it has slowed down since the middle of the year,” said Osamu Tanaka, an economist at Morgan Stanley Japan Ltd.

Regarding a production slide from the second half of 2004, Tanaka said the margin of decline was “moderate” compared with past recession phases.

In December, the index of industrial output fell a seasonally adjusted 1.2 percent to 99.6 from the previous month, following 1.7 percent growth in November.

METI left its assessment of the nation’s industrial production unchanged from November, calling it “flat.”

Production in the transport machinery sector fell 3 percent, due partly to sluggish automobile output.

“A fire at a plant of a carmaker is believed to have negatively affected output in the sector in December,” a METI official said, refering to Mazda Motor Corp., which suspended production at a plant in Hiroshima last month due to a fire.

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