Japan’s Economy Still at Risk despite Factory Output Gains

Japan’s factory output has seen growth in February for the first time in four months. Unemployment levels, however, remain low, showing signs of the country’s economy being in a fragile condition.

According to the data released by the Ministry of Economy, Trade, and Industry, Japan’s factory output rose 1.4 percent, but barely regained a 3.4 percent slump witnessed since the beginning of the year. Retail sales, at the same time, rose 0.4 percent only.

“Allowing for the usual upward bias in those projections, they point to broadly flat output over the next two months. That means that industrial production may have plunged by around 3 percent in the first quarter,” a senior Japan economist at Capital Economics said.

“We still expect consumer spending to rise a bit in the first quarter. But that won’t offset a drag from net trade and falling investment spending,” he added.

Unemployment levels reached 2.3 percent for the previous month with job availability rate at 1.63 per jobseeker peaking at a 44-year high.

The CPI, or Consumer Price Index, of Tokyo increased 1.1 percent last year, holding steady since January of this year.

"Output may have bottomed out after sharp falls and given us some relief in that sense, but companies remain cautious about ramping up production because they are not sure about the strength of the economy. As long as we see growth in exports and a relatively weak yen (against the U.S. dollar), production will likely hover around current levels," a senior market economist at Mizuho Securities Co said.

Manufacturers said they expect output to increase 1.3 percent in March, and 1.1 percent in April. The index of industrial shipments rose to 101.6 by 1.8 percent, while the index of inventories rose to 102.2, a 0.5 increase from the previous numbers.

The cabinet office addressed the latest index as “signaling a possible turning point” headed for a major decline, while analysts also stated that trade wars led by the United States could possibly be a huge problem for an economy that’s still caught up against deflation.

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