Japan's April Industrial Production Falls 1.2%
May 29 (Bloomberg) -- Japanese manufacturers cut production in April as orders for semiconductor machinery and digital cameras slumped, raising concern that the world's second-largest economy may fall into its fourth recession since 1991.
Industrial production fell 1.2 percent from March, seasonally adjusted, the Ministry of Economy, Trade and Industry said. That matched the median forecast of 33 economists in a Bloomberg News survey. From a year earlier, production rose 3.6 percent.
Global orders for computer chip-making equipment made by Tokyo Electron Ltd. and rivals fell in April from a year earlier as customers such as Intel Corp. cut spending. Production may fall further as a deadly virus curbs growth in Asia, which buys two- fifths of Japanese exports.
The extent of SARS ``has been unexpected and we are worried about it every day,'' said Fujio Mitarai, president of Canon Inc., Japan's biggest office equipment maker. The company said it hasn't been directly affected by SARS, though it ``will probably be taking measures against SARS throughout the year.''
Japan's economy didn't expand in the first quarter, ending nine straight months of growth, as the war in Iraq cut exports and a plunge in stocks hurt corporate profits. Exports to Asia may fall as severe acute respiratory syndrome shakes consumer confidence in the region and keeps shoppers out of stores.
The yen weakened to 118.71 to the dollar at 1:54 p.m. from 118.58 late yesterday in New York. The yen has gained 1.5 percent against the dollar in the past month.
Virus
``Exports to Asia have been supporting the recovery, and once that goes, it raises the possibility'' of a recession, said Hisashi Yamada, senior economist at Japan Research Institute Ltd. He expects the economy to shrink 0.1 percent in the second and third quarters.
Merrill Lynch Japan Inc. expects the economy to shrink 1 percent in the second quarter from the first, according to a research report. UBS Warburg Japan Ltd. predicts a contraction of 0.5 percent, said economist Ayako Mitsui.
Growth in China, Asia's second-largest economy, may fall to 6 percent this year from 9.9 percent last year, according to Goldman Sachs Group Inc. and Peking University researchers. The disease has claimed 321 lives in China, two-fifths of the world's fatalities.
SARS is disrupting the operations of Japanese companies in the world's most-populous nation. Matsushita Electric Industrial Co., the world's biggest consumer electronics maker, has shut three factories in Beijing since April after finding that its workers may have been infected.
Exports
Exports drove Japan's economic growth last year as falling wages and rising unemployment crimped consumer demand. The jobless rate held just below a record-high 5.4 percent in April, a report tomorrow will probably show, according to the median forecast in a Bloomberg News survey of 36 economists.
Japan is counting on a recovery in demand in the U.S., its biggest export market, to stave off a recession. A report today will probably show the U.S. economy grew 1.8 percent in the first three months of 2003, a faster pace than the initially reported 1.6 percent rate, according to the median of 65 forecasts in a Bloomberg News survey.
The No. 249 Japanese government bond, which carries a 0.6 percent coupon and matures in 2013, fell 0.047 to 100.698 at 1:55 p.m. in Tokyo, pushing the yield up half a basis point to 0.525 percent. The yield fell to a record 0.520 percent yesterday. A basis point is 0.01 percentage point.
Inventories fell 0.2 percent in April from March to the lowest level in 15 years, today's report said. It forecast that production would rise 2.6 percent in May and 1.1 percent in June.
Since the forecasts ``don't take into account the risks of SARS, the strong yen and global disinflation, there's a possibility we could see those forecasts cut in June,'' said Soichi Okuda, a senior economist at Aozora Bank Ltd. in Tokyo, who correctly predicted the 1.2 percent decline in production.
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