Japanese industrial output rises for third straight month

Japan's industrial output rose for a third straight month, matching the fastest pace in 56 years, as the world's number two economy claws back from its worst recession on record, data showed yesterday.

Japanese manufacturers moved swiftly to idle production lines after the global economic downturn sent their exports plunging. Having succeeded in reducing their bloated stockpiles, they are now ratcheting up output again.

Production rose 5.9 per cent in May from the previous month, matching April's revised growth, which was the strongest since a record 7.9 per cent increase in March 1953, according to the trade and industry ministry.

Production is likely to continue to climb through September on the back of rising exports and economic stimulus measures, predicted Barclays Capital's chief Japan economist, Kyohei Morita.

"However, we have yet to see a self-sustaining economic recovery backed by a turnaround in capital expenditure," he added. Market expectations had been for a slightly bigger increase of 6.9 per cent. Compared with a year earlier, production was down 29.5 per cent, underscoring the drastic measures taken by firms since the economic crisis erupted.

Output growth is expected to slow to 3.1 per cent in June and to 0.9 per cent in July, according to manufacturers' forecasts, the ministry said.

"Production has been rebounding sharply in response to earlier drastic cuts but the momentum is likely to slow in the months ahead," said Hiroshi Watanabe, an economist at the Daiwa Institute of Research.

Production in May was largely boosted by higher output of automobiles, mobile telephones and electronic devices, which had seen a particularly sharp decline in demand due to the global economic slowdown.

While output is now rebounding, it remains much lower than it was before the crisis began.

Production of cars, trucks and buses in Japan was down 41.4 per cent in May from a year earlier, while exports were 55.9 per cent lower, the Japan Automobile Manufacturers Association said Monday.

Japan entered recession in the second quarter of 2008 as its heavy reliance on overseas markets as an engine of economic growth left it highly vulnerable to the fallout from the global economic crisis.

The Japanese economy suffered its worst contraction on record in the first quarter of 2009, shrinking at an annualised pace of 14.2 per cent.