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Japan factory output slides, new jobs dry up

Japan factory output slides, new jobs dry up
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First Published: Fri, Feb 27 2009. 12 12 PM IST
Updated: Fri, Feb 27 2009. 12 12 PM IST
Tokyo: Production at Japanese factories fell by a record 10% last month and jobs proved increasingly hard to find, showing Japan’s worst recession since World War Two is deepening.
Annual core consumer inflation slowed to nothing, government data showed, as falling oil prices take the world’s second-biggest economy back towards deflation less than two years after it escaped the last round of falling prices.
The economic woes, and political rows that are slowing government stimulus efforts, have taken the yen to 3-1/2-month lows as investors lose confidence in a currency once seen as a haven from the global financial crisis.
“Japan’s economy is now falling off a cliff, and it may not be able to find an exit until early next year,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
Employment data for January showed new job offers fell 18.4% from a year earlier, while the ratio of jobs to applicants hit a five-year low of 0.67, meaning there were only two jobs for every three applicants.
Discouraged workers are leaving the workforce, officials say, and the tough times prompted households to cut their spending by 5.9% in January from a year earlier.
The yen hit a three-month low of ¥98.72 per dollar on Thursday, having slid nearly 12% from a 13-year peak of ¥87.10 per dollar last month.
The strong yen has played a big role in a roughly 15% slide in the Nikkei share average so far this year, as it curbs exports and profits on overseas sales, but Yosano saw little respite for exporters with the global economy so weak.
Policymakers around the world have highlighted the threat of deflation to the global economy, and Japan is seen particularly at risk, as plunging demand for its exports puts downward pressure on already frail domestic demand.
The January core consumer price index (CPI), which excludes fresh food but includes oil products, may have been flat from a year earlier but economists, who had expected a 0.1% fall, said a return to deflation had only been delayed.
Annual core consumer inflation in Japan has been slowing sharply since it hit a decade high of 2.4% last summer, reflecting a plunge in oil prices since then. The Bank of Japan is forecasting two years of deflation.
While economists debate whether Japan will face chronic deflation - where price falls lead shoppers to hold back, pushing prices down further - they say consumer price moves will turn negative as businesses offer bigger discounts to tempt customers.
Industrial output fell a record 10% in January, as exports of cars, auto parts and electronics tumbled and manufacturers tried to clear stocks of unsold goods.
Economists said they expected the Bank of Japan to take more steps to ease a credit squeeze that is robbing businesses of cash and driving up bankruptcies, but they said the real action to stimulate the economy had to come from the government.
The lower house of parliament is due to approve a record annual budget on Friday but squabbling has held up other stimulus efforts, with opposition parties able to stall legislation in the upper house as they try to force an early election to capitalise on their lead in opinion polls.
While the global financial crisis has dragged much of the rich world into recession, Japan has been among the hardest hit as it had relied heavily on exports for growth.
Its economy shrank 3.3% in the last quarter, its biggest contraction since the oil crisis of the 1970s and three times the fall in gross domestic product in the same quarter in the United States and more than double that in the euro zone.
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First Published: Fri, Feb 27 2009. 12 12 PM IST
More Topics: Japan | Economy | Factory | Loss | GDP |