Japan Sept indl output down 0.7 pct as more firms adjust inventories -
Thursday, October 28, 2004 2:14:44 AM
afxpress.com
TOKYO (AFX) - Industrial output in September fell a seasonally-adjusted 0.7 pct from the previous month, well below expectations, preliminary data issued by the Ministry of Economy, Trade and Industry (METI) showed
METI said the indicator shows the effects of broadening moves to adjust inventories in the electronics sector
Production in September at Japan's factories and mines was expected to rise 0.5 pct, according to the average forecast of 23 research houses polled by the Nihon Keizai Shimbun. The forecasts ranged from a decline of 0.2 pct to an increase of 1.3 pct
METI itself forecast last month that output would rise 1.3 pct in September
Industrial output has risen year-on-year for 13 straight months due to expanding exports and increased corporate capital spending. But industrial output has now fallen or remained unchanged month-on-month three of the past four months, and other data point to a worrisome softening in exports, the driving force behind Japan's economic recovery
Citing the rapid slowdown in production activity at the electronics sector, which had supported overall production activity in Japan until early this year, the METI lowered its assessment of the industrial production trend to 'flat' from the previous judgement that it is rising moderately
This was the first downward revision of the assessment since November 2002, sparking concern that industrial production is now poised to slip back into a falling cycle amid a slowdown of economic growth in China and the US
"The production adjustment, which began in the devices sector, is now broadening to the electric products sector, including digital home appliance products," said Taro Saito, economist at NLI Research Institute, the research arm of Japan's largest life insurer Nippon Life Insurance
As evidence of such a development, Sharp Corp, Japan's largest liquid crystal display panel and LCD TV set maker yesterday warned of a slowdown in sales of its LCD TVs and increasing pressure on its electronic devices, especially overseas
"As overseas demand for LCD TVs did not grow as strongly as we had earlier projected, we have reduced the year to March 2005 LCD TV sales projection to 2.7 mln units from 3.0 mln units," Sharp executive vice president Hiroshi Saji said
Advantest Corp President Toshio Maruyama also warned of a slowing in new orders for its testers as global digital home appliance and semiconductor makers step up their destocking
"New orders started to dwindle suddenly from late July, led by LCD driver makers in Taiwan," Maruyama said
"The downturn in new orders in Taiwan then spread to various countries, including South Korea, Japan and the US," he said
NLI's Saito said that with overseas demand slowing down, those sectors which have strong dependence on exports, such as the general machinery sector and the auto sector, need to be watched closely
Last week the government reported that the merchandise trade surplus in September fell a seasonally-adjusted 21.8 pct from the previous month, the second straight decline, with exports falling by 2.3 pct
Japan's largest construction and mining equipment maker Komatsu Ltd, while raising its first half profit forecast recently, said sales are not growing at all in China at present
The closely-watched electronics device sector saw 4.1 pct drop in September from August, the fifth fall in the past eight months, hit by a 10.8 pct plunge in production of logic ICs and a 15.2 pct fall in memory output
The electric sector, which includes some digital home appliance products, suffered a 9.6 pct decline in production, led by a 11.6 pct drop in output of LCD TVs
In September, inventory increased 1.9 pct from a month earlier, showing that despite the production cut-backs, inventory adjustments are not making good progress
On a quarter-on-quarter comparison, Japan's industrial production fell 0.8 pct in the three months to September, the first fall in five quarters, while shipments dropped 1.2 pct, the first fall in 11 quarters, but inventories jumped 1.9 pct, the first rise in two quarters
In the three months to September, production in the electronics device sector dropped 1.6 pct from the previous quarter, the first fall in seven quarters
Despite the disappointing data, a METI official stressed it is premature to say that Japan's industrial production will tumble into a falling cycle
"Given that the receipt of new orders is running at a comparatively high level, the production climate has not worsened yet and production is just staying at a comparatively high level," the official said, pointing to the expected rebound in the following two months
METI forecast that production would increase 0.9 pct in October and by 1.6 pct in November. Last month METI forecast that output in October would fall 0.5 pct |
