Japan's contracting economy got a slew of bad news on Friday with November figures showing industrial production plunged by its biggest margin since records were started in 1953, the jobless rate jumped and household spending fell.
Output at the nation's vital manufacturers fell 8.1 percent from October, the government said, as Japan's automakers and other companies slashed output to cope with slowing global demand. A survey predicted a further 8 percent decline in December. "Exports and industrial production are falling so extraordinarily quickly that it almost defies analysis", said Richard Jerram, chief economist at Macquarie Securities in Tokyo. The monthly drop in factory production was nearly double the previous record fall of 4.3 percent in January 2001, according to the Ministry of Economy, Trade and Industry. Earlier this week, trade data showed that Japanese exports plunged a record 26.7 percent in November.
Many companies, including big names like Toyota Motor Corp. and Sony Corp. have announced plans to cut production and workers. The yen's recent strength against the dollar and euro has also dealt with a huge blow to this export-oriented economy by eroding overseas earnings.
The job cuts are already being reflected in a higher unemployment rate, which rose to 3.9 percent in November from 3.7 percent in October, the Ministry of Health, Labor and Welfare said. The figure does not include those who have given up looking for work and exited the labor market entirely.
The ministry said 2.56 million people were unemployed in Japan in November, an increase of 100,000 from a year earlier. Consumers are also holding back. Retail sales fell 0.9 percent in November from last year, the third straight monthly decline. And average monthly household spending dipped 0.5 percent in November from a year earlier, for the ninth straight monthly decline. Still, the drop was smaller than expected, beating the 3.6 percent decline forecast by a Kyodo News survey. Household spending is a key indicator of consumer spending, which makes up more than half of Japan's gross domestic product.
Inflation, meanwhile, eased. Core consumer prices which excludes volatile fresh food prices rose one per cent after a 1.9 increase in October. With the economy slowing, some have worried that Japan could fall into deflation, as it did earlier this decade, when prices steadily decline.
Stock investors shrugged off the bevy of negative numbers as being largely within expectations. The benchmark Nikkei 225 stock average rose 1.6 per cent to 8,739.52.
"Industrial output is highly volatile, and given the current state of the global economy, investors were not surprised by the plunge in November," Miyzawa said.
Japan's economy is already in recession. In the third quarter, Japan's economy shrank 1.8 percent at an annual pace, worst that first thought.
The outlook for manufacturers is particularly grim. If dire forecasts for the next two months of industrial production hold, factory output will have fallen 20 percent from the start of October through January 2009.
Output by automakers fell 15 percent from October and 25 percent from a year earlier. Electronic manufacturers cut output 12 percent compared the previous month and 25 percent from the same month last year.
Economists say that while the outlook for the near-term remains bleak, a modest recovery in demand and production may begin to surface in mid-2009, as governments around the world begin to implement stimulus measures announced in recent months. "We haven't see the light at the end of the tunnel yet, but we should be seeing it in a few months", said Takuji Okubo, an economist at Merrill Lynch.