Output dives at Japanese factories

Japan's factory output and auto production have plunged for a fifth straight month, data showed yesterday, as the government pledged to revive the recession-hit economy with more stimulus spending.

As demand for Japanese goods dried up at home and abroad, industrial output from the world's number-two economy fell more than nine percent in February from a month earlier.

The auto industry later released figures showing production had more than halved year on year.

The data added to the gloom over Japan's economy, which shrank at an annualised pace of 12.1 per cent in the last quarter of 2008 and is widely believed to be headed for its worst recession since World War II.

Corporate giants such as Toyota and Sony, as well as a host of smaller firms, have slashed tens of thousands of jobs, and analysts predict the unemployment rate, due to be announced today, rose to 4.3 per cent in February.

And with consumer prices flat, Japan is bracing for another bout of deflation that would hit already struggling businesses harder.

The trade and industry ministry said yesterday that factory production in February was down 9.4 per cent from the previous month - worse than a market forecast of a nine per cent decline.

"Overall, industrial production is dropping quickly," due mainly to slumps in transport equipment, machinery and electronics parts, the ministry said.

The report also said production was expected to pick up as inventories run low, with the ministry forecasting a 2.9 per cent rise for March and a 3.1 per cent increase in April, based on the manufacturers' own forecasts. But the ministry also warned that "it is more than possible for production data in March and April to end up negative."

The Japan Automobile Manufacturers Association meanwhile reported that production dropped 56.2 per cent in February from a year earlier, as output fell for all product segments - passenger cars, trucks and buses.

Unit production reached 481,396 vehicles, down from 1.098 million in the same month last year, it said.

Industry leader Toyota Motor Corp. cut production by 64 per cent to 141,127 units, second-placed Honda Motor Co. reduced output 48.4 per cent to 54,748 and number three Nissan Motor Co. was down 68.8 per cent to 43,885.

To kick-start Asia's biggest economy, Tokyo is preparing stimulus spending that will "far exceed" two per cent of gross domestic product (GDP), the Economy and Finance Minister, Kaoru Yosano, was quoted as saying. The Wall Street Journal reported online that Yosano said Japan would meet the goal set by the International Monetary Fund (IMF), which has urged nations to boost fiscal stimulus to at least two per cent of GDP. Mr Yosano reportedly said that without stimulus spending and other steps, the economy could deteriorate in line with a recent IMF forecast of a 5.8-per cent GDP decline for 2009. Japan has approved three stimulus plans since October with spending, tax cuts and other measures worth a combined 75 trillion yen ($765 billion), although actual fiscal spending totalled only about 12 trillion yen. Mr Yosano has hinted that the upcoming bill would reach around $200 billion dollars.

Media reports said Prime Minister Taro Aso is planning to unveil the broad outlines of a new package before he leaves Tokyo for the Group of 20 summit of industrialised and large developing nations in London on Thursday.