The nation’s industrial output tumbled more than forecast to the lowest level since the aftermath of the March 11, 2011 Great East Japan Earthquake, bolstering the case for Prime Minister Shinzo Abe to unleash large-scale stimulus.
The 1.7 percent drop in November from October exceeded all 27 forecasts in a Bloomberg News survey, a government report showed Friday. The nation also remained mired in deflation, with consumer prices excluding fresh food dropping 0.1 percent from a year before, compared with a central bank goal of 1 percent and Abe’s desired target of 2 percent.
With South Korea reporting a jump in production almost double the highest estimate among economists surveyed, Japan’s data may strengthen the new Abe administration’s determination to drive down the yen and force the Bank of Japan to add monetary stimulus. On the fiscal front, Abe has told ministries to compile emergency spending proposals by Jan. 7.
“Weakness in exports is the major drag on Japan’s economy,” said Yoshimasa Maruyama, chief economist at Itochu Corp. “Given the weak state of the economy, Abe’s government may need a large-scale stimulus program to boost growth.”
Maruyama sees ¥5 trillion ($57.8 billion) to ¥10 trillion of initial support measures and says that it’s “almost a done deal” that the BOJ will move to a more aggressive inflation target in January.
Retail sales stagnated in November, a separate report showed Friday, while the jobless rate was 4.1 percent. The seasonally adjusted industrial production index fell to 86.4, the lowest level since April 2011.
“Monetary policy will be loosened further, while Abe will introduce big fiscal pump-priming,” said Kiichi Murashima, chief economist at Citigroup Inc. in Tokyo.
The economy contracted for the two quarters through September, meeting the textbook definition of a recession. Gross domestic product may shrink an annualized 0.5 percent in the final three months of this year, according to the median forecast in a Bloomberg News survey. Exports slid for a sixth month in November on Europe’s crisis and tensions with China.
In contrast, South Korea’s industrial output exceeded estimates in November and the nation’s current-account surplus rose to a record, signaling a growth recovery may take hold in Asia’s fourth-largest economy.
Output rose 2.3 percent from October, when it advanced 0.7 percent, Statistics Korea said Friday. The median estimate of 10 economists in a Bloomberg News survey was for a 0.8 percent gain. The surplus was $6.9 billion.
Improvements in the U.S. economy and signs of a rebound in China are brightening the outlook for South Korea’s shipments even as austerity measures in Europe set limits.
President-elect Park Geun Hye, who will take office in February, may oversee a 3 percent economic expansion next year after 2.1 percent growth in 2012, according to Finance Ministry estimates.
Wages fall again
Nonregular wages earned by Japanese workers fell for the second straight month in November due chiefly to a slowing global economy, the Ministry of Health, Labor and Welfare said Friday.
The average nonregular wage dropped 1.3 percent from a year before to ¥18,919, the ministry said.
The decrease is mainly attributable to a fall in overtime working hours at manufacturers because of the economic slowdown abroad, ministry official said.
Overtime declined 2.2 percent to 10.5 hours per worker, led by a 6.2 percent fall in the manufacturing sector.
The average regular wage rose 0.5 percent to ¥244,128.
Bonuses and other special wages plunged 26.8 percent to ¥11,056.
Overall wages dropped 1.1 percent to ¥274,103, down for the third straight month.
The report covered companies with at least five employees.
Consumption up 0.2%
The average consumption spending by Japanese households in November rose 0.2 percent from a year before in price-adjusted real terms, up for the first time in three months, the internal affairs ministry said Friday.
The reading came against a median forecast of a 0.8 percent rise among 24 economic research institutes polled by Jiji Press.
Household spending averaged ¥273,772 in November, the ministry said.
The rise reflects brisk demand for winter clothing and kerosene due to declining temperatures. Expenses on accommodations and transportation increased, suggesting a rise in travel demand.
Because the rise stemmed mainly from seasonal factors, however, the ministry kept its view on household spending unchanged for the third consecutive month, saying it is showing signs of weakness.
Monthly income at wage-earnings households averaged ¥432,681, up 2.1 percent in real terms for the fourth straight month of advance.
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