• Kyodo News

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Industrial production fell a seasonally adjusted 10.0 percent in January, bringing the record-breaking contraction to three months in a row as exports and domestic demand dived, the government said Friday.

The unprecedented slump took place as the global economic downturn began to take a toll on nearly all industries, not just those dependent on overseas markets, industry ministry officials said.

The index of output at mines and factories stood at 76.0 against the base of 100 for 2005, the Ministry of Economy, Trade and Industry said in the preliminary report. The latest number means output has been on the decline for four consecutive months, the longest under the current base year.

Economists surveyed by Kyodo News projected an average fall of 9.9 percent.

A 17.3 percent dive in production in the transport sector, including cars and trucks, dealt the heaviest blow to output, the officials said.

All 16 industrial sectors in the analysis saw a drop in output.

Electronic parts and devices, down 21.8 percent from the previous month, had the second-largest impact on the index, followed by general machinery and steel.

The ministry said output by Japanese manufacturers is “rapidly declining,” using the same expression for the third straight month.

The index of shipments fell 11.4 percent to 76.1, while that for inventories fell 2.0 percent to 108.3.

Some analysts said factory output may soon bottom out.

Coupled with accelerated production cuts, inventories declined for the first time in five months. The 2.0 percent shrinkage was the largest since February 2003, when it fell 2.5 percent, the ministry said.

“Amid gloomy news every day, the inventory reduction was one of the few positive things we found,” said Kyohei Morita, chief economist at Barclays Capital Japan Ltd.

Although inventories are still accumulating in distributive stages, at the production level they are apparently getting smaller at a fast clip due in part to the rapid pace at which workers were idled, unlike the recession in the 1990s, Morita said.

Inventories at electronics and device makers dropped 13.7 percent. Those at communication and information electronics equipment makers contracted 11.9 percent. But automakers’ inventories widened 2.1 percent.

Looking ahead, the ministry said output from manufacturers is expected to shrink 8.3 percent in February but rise 2.8 percent in March.

Big output growth is anticipated at factories that make transport equipment, electrical machinery, pulp and paper, and electronic parts and devices.

The transport sector is projected to raise output by 6.2 percent in March.

Still, Morita and some other economists warned against taking the projections at face value.

“It should be noted that a possible rise in output is not resulting from a pickup in the economy,” Morita said.

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