Japan’s factory output took a record tumble in March after a devastating earthquake and tsunami forced the nation’s biggest companies to shutter plants and crippled supply chains, data showed yesterday.
A 15.3 per cent dive in Japan’s industrial production month-on-month was the sharpest since records began in 1953, the government said.
In other data illustrating the impact of the March 11 disasters on the world’s third-biggest economy, household spending suffered its biggest-ever drop as cautious consumers held off on purchases of non-essential goods.
Many see Japan sliding into temporary recession after the disasters left around 26,000 dead or missing and devastated infrastructure and manufacturing facilities in the nation’s worst crisis since World War II. Ratings agency Standard & Poor’s on Wednesday cut its outlook on Japan’s sovereign debt following the disaster and warned that reconstruction costs could pass $600 billion.
“The full impact of the disaster is still unclear and hard to predict,” said Hideki Matsumura, a Japan Research Institute analyst, adding that the continued threat of power shortages going into the summer added to uncertainty.
The post-quake fall in industrial production was worse than the previous record drop of 8.6 per cent in February 2009 as the global financial crisis pushed Japan into its worst post-war recession.
Economists surveyed by Dow Jones Newswires and the Nikkei financial daily had expected Japan’s industrial output to fall 10.8 per cent in March after a 1.8 per cent rise in February.
Japan’s biggest recorded quake and the tsunami it unleashed shattered supply chains and crippled electricity-generating facilities, including a nuclear power plant at the centre of an ongoing atomic emergency.
Many component manufacturers, particularly in the auto sector, are based in the worst-hit regions and suffered damage to their facilities from the 9.0 magnitude earthquake or were inundated by the giant wave that followed.
The Ministry of Economy, Trade and Industry said falls in the production of autos and other vehicles and general machinery drove the decline.
Naoki Murakami, chief economist at Monex securities, noted that automobile and other transport production had been hit “as the disaster stopped factory lines and led to the collapse of supply chains.”
Top automakers such as Toyota have returned to production but at only 50 per cent of normal volume.
While the government said it expected production to increase in April and May, analysts warned that Japan’s output would continue to be compromised.
“Delays in parts deliveries remain quite severe. The pace of production recovery is expected to be very slow until summer,” said Murakami.
Japanese household spending plunged 8.5 per cent in March from a year earlier in the biggest drop since records began in 1964.
Although water and food sales surged as people stockpiled supplies after the quake and the nuclear crisis at the Fukushima Daiichi plant, consumers have held off spending on areas such as entertainment and travel.
Analysts warn that this mood, usually characterised as “voluntary self-restraint”, will exacerbate any downturn.
The figure was much worse than a 0.2 per cent fall in February and the drop of less than seven percent that economists had expected. Spending by wage-earning households tumbled 11 per cent following a 0.7 per cent drop in February, also a record fall, the ministry said.
The core consumer price index fell 0.1 per cent in March, matching market expectations as Japan remained mired in deflation for a 25th month in a row.
However core prices in April in Tokyo – seen as a leading indicator for the nation – rose 0.2 per cent, the data showed.
The unemployment rate stood at 4.6 per cent in March, unchanged from a month earlier, but figures from northeastern Japan, hit by the March 11 disaster, were excluded, the government said yesterday.
Last week worst-hit Miyagi prefecture reported that its labour offices had received more than 17,000 applications for unemployment benefits in the month after the quake – a threefold increase on-year, Kyodo News reported.
Meanwhile the Bank of Japan yesterday left its key rate unchanged. The bank kept its key rate at between zero and 0.1 per cent and offered details of its 1 trillion yen ($12 billion) lending scheme for banks in quake-hit areas.
In a bid to ensure that financial institutions in disaster-hit areas can meet demand for post-quake reconstruction funds, the BoJ earlier this month unveiled the scheme offering 0.1 per cent interest one-year loans.
The central bank’s policy board decided at its one-day meeting yesterday that each participating bank can borrow a maximum of 150 billion yen of funds. Applications for the funds must be made by the end of October 2011.
It also broadened the range of eligible collateral for money market operations for banks in affected regions.