TOKYO — Japan’s factory output fell the most in more than two years in June, although the labor market improved, a sign that Prime Minister Shinzo Abe’s pro-growth policies are bearing fruit but still have far to go to establish a durable recovery.
The decrease in industrial production, the first in five months, largely reflected efforts by manufacturers to avoid a buildup of inventory, and they forecast a brisk pickup in July.
The levels of unemployment and job availability, the best since 2008, augur well for the private spending Mr. Abe has sought to prompt through aggressive monetary and fiscal stimulus programs since he took office in December.
Analysts said the data served as a six-month scorecard for Mr. Abe, who is seeking to strike a balance between reviving growth and fiscal consolidation, while facing a tough decision on whether to go ahead with a planned increase in the sales tax next year.
The 3.3 percent decline in industrial output from the previous month was the largest since March 2011, when an earthquake and tsunami ripped through Japan’s northeastern coastal areas, data released Tuesday by the Ministry of Economy, Trade and Industry showed.
The drop exceeded forecasts of a 1.8 percent decline in a Reuters poll because of lower production of cars in response to lower demand in Japan and abroad. Production of semiconductors also decreased, reflecting weakening demand for smartphones in Asia.
Output had risen 1.9 percent in May, and the ministry stuck to its assessment that the trend was showing a moderate increase. Manufacturers expect output to have risen 6.5 percent in July and to fall 0.9 percent in August.
“I think there is no change in the trend that production is expected to stay on a steady recovery as June trade data was good, benefits from the yen’s weakness are appearing, and domestic demand is solid,” said Yoshiki Shinke, chief economist at Dai-Ichi Life Research Institute.
Labor market data showed that the ratio of jobs to applicants rose to 0.92 in June from 0.9 in May, meaning jobs were available for more than 9 out of 10 job seekers. That was the strongest demand for workers in five years.
The unemployment rate fell to 3.9 percent in June, its lowest level since October 2008.
However, wage earners’ household spending unexpectedly fell 0.4 percent in June from the same month a year earlier, compared with a median estimate for a 1 percent increase, suggesting that rapid gains in private consumption might be moderating slightly.
“We see positive numbers emerging, including a drop in the jobless rate, which is one example,” Finance Minister Taro Aso told reporters. “Certainly the mood is looking up.”
There are signs Mr. Abe is rethinking the sales tax increase out of concern it could derail a nascent economic recovery.
Mr. Aso said the final decision would be made after a summit meeting of the world’s 20 major economies in early September.
Article source: http://www.nytimes.com/2013/07/31/business/global/output-falls-in-japan-but-labor-market-expands.html?partner=rss&emc=rss