• Kyodo

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Japan’s industrial output in October rose a seasonally adjusted 0.1 percent from the previous month, up for the third straight month, buoyed by upturns in both domestic and external demand, the government said Wednesday.

Production is likely to remain on a recovery track, as the Japanese yen may extend losses versus the U.S. dollar amid growing expectations of a near-term rate hike by the Federal Reserve and fiscal expansion by President-elect Donald Trump, economists say.

The index of output at factories and mines stood at 98.5 against the base of 100 in 2010, hitting its highest level since April 2015, the Ministry of Economy, Trade and Industry said in a preliminary report.

Production of smartphones for China and that of automobiles at home were robust last month, a METI official said.

The government left its basic assessment intact, saying industrial production shows signs of increasing at a moderate pace. But the official expressed a positive outlook for output.

“The depreciation of the yen could prop up Japan’s exports, possibly prompting more companies to boost production,” the official said at a news briefing.

Manufacturers polled by the ministry said they expect output to jump 4.5 percent in November and then drop 0.6 percent in December.

A falling yen usually supports the country’s export-oriented economy by making Japanese products cheaper abroad and shoring up the value of overseas revenues in yen terms.

The dollar has surged more than 10 percent versus the yen since the Nov. 8 U.S. presidential election, as U.S. Treasury yields increased with speculation mounting that the Trump administration may bolster government spending, causing higher inflation in the United States.

Demand for the yen would also recede with the U.S. central bank set to raise its policy rate next month, which is expected to widen the Japan-U.S. interest rate gap further along with aggressive monetary easing by the Bank of Japan.

“If the yen stays weak, firm exports may become a driver of growth in industrial production in 2017,” said Yoshimasa Maruyama, chief economist at SMBC Nikko Securities Inc.

Some analysts, however, are still cautious about the economic policies of Trump given his “America First” platform, saying they could pose downside risks to Japan’s manufacturing sector.

“Should protectionism grow in the United States, Japan’s auto and electronics industries could be placed in a predicament,” said Junichi Makino, chief economist at SMBC Nikko Securities Inc.

Industrial production rose 0.6 percent in September and 1.3 percent in August, after a 0.4 percent fall in July.

In October, the electronics parts and devices sector that manufactures liquid crystal panels and chips was the biggest contributor to the industrial output index, registering a 4.6 percent gain.

The transport sector that includes the auto sector, a key Japanese industry, also climbed 0.6 percent.

The index of industrial shipments increased 2.2 percent to 98.5, while that of inventories went down 2.1 percent to 108.6.

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