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Japan factory output up, oil rise spells risk
AFP - 1 hour 54 minutes ago
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TOKYO (AFP) - – Japan's industrial output rose for a third straight month in January on stronger overseas demand, but the pace was slower than expected and high energy costs amid the Mideast crisis spell fresh risks.
Factory production rose 2.4 percent month on month, according to the Economy, Trade and Industry Ministry, supported by carmakers and semiconductor-manufacturing devices.
Although it represents the third gain in a row the figure was down from December's surprise 3.3 percent jump and also off the 3.8 percent predicted in a survey by the Nikkei business daily.
"The rise was way below expectations, but we don't have to be too pessimistic," said Hiroshi Watanabe, economist at Daiwa Institute of Research.
"The figure was still firm and suggests a stable recovery."
He said companies were upgrading their production plans as the economic recovery keeps outperforming their earlier projections.
Inventories grew 4.7 percent in January, the highest rise in comparable data for eight years due to bigger stockpiles of flat screen TVs and other electric appliances and a slowdown in regional shipments during Chinese New Year.
But factories still plan to increase their output by 0.1 percent for February instead of earlier plans to reduce it by 1.2 percent, the data showed. The monthly growth is expected to accelerate to 1.9 percent in March.
Naoki Murakami, chief economist at the Monex securities firm, also said Japan's factory output was recovering smoothly on a revival of automobile production from its bottom in October.
"Uncertainty over the global economy had emerged due to upsurges in oil prices but Japanese manufacturing activities are expanding smoothly on the back of recovery in the global economy led by the United States," Murakami said.
Japanese automakers' production in Japan fell 6.3 percent in January, suffering a year-on-year fall for the fourth consecutive month, according to the Japan Automobile Manufacturers Association.
But their exports of cars, trucks and buses posted a 7.3 percent rise, logging growth for 13 months in a row on robust demand from the rest of Asia as well as Russia and parts of Eastern Europe, the association said.
Watanabe of the Daiwa institute however cautioned that vigilance was needed as political turmoil has gripped the Middle East and North Africa in recent months, sending up oil prices.
Crude jumped in Asian trade Monday after anti-government turmoil now convulsing Libya and much of the Middle East spread to Oman, another Gulf oil exporter, over the weekend with police shooting dead two demonstrators.
Brent North Sea crude for delivery in April gained $1.28 to $113.42 per barrel while New York's main contract, light sweet crude for April delivery, rose $1.66 to $99.54 a barrel.
"Higher commodities prices could lead to a standstill in the global economy, which could send the yen higher," dealing a double-hit to Japan's export-dependent economy, he said.
The crisis in the Arab world has led to buying of Japan's safe-haven currency, while the country runs a trade surplus and has rock-bottom interest rates with no real chances of a further cut, Watanabe said.
In Tokyo trade Monday, the dollar was at 81.70 yen, around two yen lower than last week.
Most economists expect Japan's economy to expand again in the January-March period after gross domestic product contracted by an annualised 1.1 percent in the previous quarter.
Credit Suisse Japan chief economist Michihiro Shirakawa said "it is highly likely that Japanese exports and production will be on a recovery path until around summer unless higher geopolitical risks cause rapid rises in energy prices."
"But growth in industrial production may slow in accordance with a clearer slowdown in Asian economies in the latter half of the year," he said in a note.
The trade ministry said in a separate report Monday that Japan's commercial sales rose 3.0 percent in January from a year earlier with sales by retailers edging up 0.1 percent due mainly to higher fuel prices.
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