• Kyodo, Bloomberg


Industrial output in April grew 0.3 percent in April, up for the third consecutive month, supported by robust production of cars and auto parts, government data showed Thursday.

But the gain was less than forecast, adding to concerns about the strength of the economy following a contraction in the first quarter.

The seasonally adjusted index of output at factories and mines stood at 104.4 against the base of 100 for 2010, according to a preliminary report by the Ministry of Economy, Trade and Industry. It followed a 1.4 percent gain in March.

Among sectors that increased output, the transport equipment industry saw a 3.9 percent gain, with the output index hitting 113.2, recovering to levels last seen in 2008 before the global financial crisis triggered by the collapse of the U.S. housing market.

Despite the three straight monthly gains, manufacturers appear cautious about ramping up production, clouding the outlook for the world’s third-largest economy.

METI maintained its basic assessment that industrial production is “picking up slowly.”

“The production data were far weaker than expected. The fall in production of electronic parts and devices was particularly weak,” said Toru Suehiro, senior market economist at Mizuho Securities Co.

That industry, which produces parts for electronic devices such as smartphones and tablets, saw a 5.6 percent drop, the ministry data showed.

The index of industrial shipments rose 1.8 percent to 103.3, while that of inventories slipped 0.4 percent to 113.0.

Japan’s economy shrank for the first time in nine quarters in the January-March quarter, with growth in exports slowing from the previous quarter.

The global economy is expected to remain on a solid footing but economists say there are emerging uncertainties, such as the political crisis in Italy.

“Growth momentum for Japan’s economy appears to be weakening and output could be more or less flat in April-June. In terms of exports, there is a question mark over (the strength of) the eurozone economy,” Suehiro added.

Overall global demand is expected to remain solid, but the smartphone-driven tech cycle responsible for so much of Asia’s recent growth is cooling, and the effects were seen in Japan’s April factory output. Economists expect Japan’s expansion to resume this quarter, but risks include heightened trade frictions and U.S. protectionism, including threatened auto tariffs.

“This suggests Japan’s soft patch may be longer or deeper than expected,” said Hiroaki Muto, chief economist at the Tokai Tokyo Research Center. “Production for electronic devices was one key driver of the weakness, partly reflecting weak global demand for smartphones.”

“This is bad timing because concerns in financial markets are already heightened because of Italy,” Muto said. “More evidence of weakness in the economy could make investors step back and think that we may have more things to worry about.”

Manufacturers polled by the ministry said they expect output to increase 0.3 percent in May and drop 0.8 percent in June.

“Up until April, we have confirmed that industrial output has been recovering. But the forecasts point to some cautiousness,” a METI official said.