Japan data shows further recovery

29 July 2011 Last updated at 02:15 GMT Japanese manufacturers have been working at reduced capacity after the earthquake and tsunami Japan's economy has continued to recover from the aftermath of the earthquake and tsunami, latest government data showed.

Factory output rose 3.9% in June from the previous month as supply chain concerns eased, while household spending increased by 0.8%.

Analysts said it showed the economy was recovering faster than expected.

The data comes a day after Japan reported a rise in retail sales for the first time since the 11 March quake.

"I thought we had to wait until the middle of next year for production to come back up to levels seen before the earthquake," said Seiji Adachi, of Deutsche Securities.

"But it now looks like manufacturing activities might go back to where they were as early as January-March next year," he added.

Strong forecast Continue reading the main story

The yen's strength, if sustained for a long time, could dampen production in the longer term by hurting corporate earnings and thus their capital expenditure”

End Quote Tatsushi Shikano Mitsubishi UFJ Morgan Stanley Securities Japanese manufacturers were hit hard by the devastation caused by the earthquake and tsunami.

Disruption to the country's supply chain saw some of the biggest manufacturers curb or suspend production.

However, as the infrastructure is restored, manufacturers are becoming increasingly optimistic.

According to a survey done by the Ministry of Economy, Trade and Industry, manufacturers expect output to rise 2.2% in July and 2% in August.

"Manufacturers' strong forecasts for July and August suggest the recovery in output remains on track," said Tatsushi Shikano, of Mitsubishi UFJ Morgan Stanley Securities.

Overcoming challenges

The recovery in the supply chain and factory output has come despite the manufacturers facing various challenges, not least a shortage of electricity.

Japan has been facing a power shortage after the twin natural disasters damaged the Fukushima Daiichi nuclear plant and forced the closure of various other nuclear plants in the country.

There were concerns that the electricity shortage would hit production, especially during summer months, when demand for power is at its peak.

However, analysts said manufacturers were able to overcome this shortage by implementing changes to their working hours.

"Power problems are having less of an impact than previously thought, thanks to companies' efforts to avoid operating during peak power demand hours," said Mr Shikano.

Currency woes

While the manufacturers have been able to overcome these challenges to get their production back on track, other factors continue to remain a threat.

The biggest amongst them has been a strengthening Japanese currency.

The yen, a traditional haven, has been rising against the US dollar in wake of the ongoing debt issues in the US and Europe.

A strong currency does not bode well for Japanese manufacturers as it not only make their goods more expensive to foreign buyers, but also hurts the companies' profits when they repatriate their foreign earnings.

"The yen's strength, if sustained for a long time, could dampen production in the longer term by hurting corporate earnings and thus their capital expenditure," said Mr Shikano

View the original article here

Japan air boycott draws Seoul ire

15 July 2011 Last updated at 06:12 GMT A view of the disputed islands from the test flight South Korea has protested to Japan after Tokyo instructed its diplomats to boycott Korean Air in a territorial dispute between the two countries.

South Korea's foreign ministry called the boycott "deeply regrettable".

On Thursday Japan's foreign minister told diplomats not to fly Korean Air for a month after it carried out a test flight over disputed islands.

The islands, called Dokdo in Korean and Takeshima in Japanese, are claimed by both but controlled by South Korea.

On Friday South Korea's foreign ministry summoned a Japanese diplomat over the boycott.

"From the standpoint of bilateral relations, the Japanese decision is very disappointing," the ministry said.

It added: "Unless there are problems in terms of air traffic control, a Korean flag carrier is free to do anything within our own air space."

View the original article here

Japan quake still hurting trade

8 July 2011 Last updated at 02:13 GMT Japanese carmakers were some of the hardest hit, facing supply shortages and power cuts Japan's current account surplus fell sharply in May, as the 11 March earthquake and tsunami continue to affect exports.

The surplus shrank 51.7% to 590.7bn yen ($7.27bn; ?4.55bn) compared with a year earlier, said the Ministry of Finance.

However, that is less than most analysts had expected.

The data shows that while the economy continues to suffer from the disaster, it is recovering quicker than expected.

May's fall in the current account surplus marks the third straight monthly drop after the earthquake and tsunami wreaked havoc in the north east of Japan.

In April the surplus was down 69.5%.

Trade deficit

Even as the supply chain recovers and manufacturers come back online exports are still suffering.

The data showed that exports fell by 9.8% in May from a year earlier.

While imports rose 14.7%, mainly because of higher energy costs.

That translated to the second-biggest trade deficit on record, the ministry said.

The current account is the broadest measure of a country's trade with the rest of the world.

View the original article here

Japan imposes new energy limits

1 July 2011 Last updated at 13:00 GMT Boards in Tokyo tell office workers the current power use compared to supply Factories, shops and offices in Tokyo have been told to cut down on their energy use because of power shortages.

Large businesses in the Tokyo area will have to use 15% less energy than last year because of the closure of the Fukushima nuclear power plant.

The latest restrictions come as Japan's big manufacturers have turned pessimistic about business conditions, according to the latest Tankan survey.

The business sentiment index plunged 15 points to minus nine in June.

It is the first negative rating in 15 months, although manufacturers expect conditions to improve later in the year.

The sentiment index is derived by subtracting the percentage of respondents who say conditions are poor from those who say they are good.

No air conditioning Lights and billboards were first turned off shortly after March's earthquake.

The power restrictions came into force on Friday and will apply to big factories, office buildings, universities and department stores in the Tokyo area.

The new rules come as power use rises as a result of the summer heat.

Electricity use between 9am and 8pm on weekdays must be reduced by 15% compared with last year. The rules will be in place until 22 September.

Companies who use too much power could face fines of up to 1m yen ($12,400; ?7,750).

"We ask their co-operation so we can all overcome the energy crunch," said trade ministry official Satoshi Koyanagi.

Firms have announced plans to cut down on their energy use.

Sony says it will turn off the air conditioning after 6pm and start the business day an hour earlier than usual.

The Tokyo Stock Exchange has turned off its electronic price ticker and will not receive visitors until the end of September.

"We are turning off all the lights and air conditioning in the visitors' areas," said stock exchange spokesperson Yukari Hozumi.

The government has already advised office workers to wear casual clothing in place of jackets and suits rather than to turn up air conditioning systems.

The earthquake and tsunami that hit Japan on 11 March led to rolling power blackouts affecting factories around the country.

Positive outlook

While the damage caused by the twin natural disasters has hit Japanese manufacturers hard, companies say they expect conditions to improve in the second half of the year.

Continue reading the main story

A slowdown in the global economy would slow the recovery in exports, while power supply problems in the summer may put a lid on factory output”

End Quote Takeshi Minami Norinchukin Research Institute Analysts said that as conditions on the ground improve, businesses are likely to bounce back.

"The headline index was a little weaker than expected [in June], but big manufacturers' sentiment is seen as rebounding firmly," said Takeshi Minami of Norinchukin Research Institute.

"The data confirmed the view that the worst is over and the economy will return to a moderate recovery led by manufacturers later this year," he added.

Data released earlier this week showed that factory output in Japan was recovering at a faster-than-expected pace.

Industrial production in May rose by 5.7% compared with the same month last year, the second successive month of rising output.

Many manufacturers continue to face power cuts and supply chain shortages Stumbling blocks

However, though the supply chain conditions and industrial output have started to improve, analysts warned the recovery could be derailed by various factors.

"There are risks to such a recovery, which will be based on reconstruction demand and exports," said Mr Minami.

If a political impasse were to delay reconstruction projects in the country it would have a detrimental affect on the economy, he said.

Hiroshi Miyazaki of Shinkin Asset Management Company added that a lot of Japanese companies were anticipating increased demand due to reconstruction activity after the quake and tsunami.

"If this demand doesn't come through as expected, there is a risk of a sharp adjustment," he warned.

Analysts said a combination of other internal and external factors may also hit the Japanese manufacturing sector.

"A slowdown in the global economy would slow the recovery in exports, while power supply problems in the summer may put a lid on factory output," said Mr Minami.

View the original article here

Japan export dip to hurt recovery

20 June 2011 Last updated at 06:09 GMT Japan's exports were hit by large production losses in the auto sector

Japanese exports dropped more than expected in May, renewing worries about the pace of Japan's recovery from an earthquake and tsunami.

Exports fell 10.3% from a year earlier, the finance ministry said. Analysts were expecting a drop of 8.4%.

Power shortages and supply chain issues in manufacturing continue to disrupt production and hurt overseas sales.

The trade balance also suffered a deficit for a second month because of a jump in imports.

"Over all the data shows that Japan's economy appears to be bottoming out, but the speed of the recovery will be moderate," said Takeshi Minami, chief economist at Norinchukin Research Institute.

Trade woes

Carmakers saw exports drop 38.9% in May from a year earlier.

But while that is a significant drop, it was actually less than the 67% slump seen in April.

At the same time, shipments of semiconductors, auto parts and other electronic components also suffered.

As the country rebuilds after the tsunami, imports have picked up, rising 12.3% in May from the year before.

That has resulted in a trade deficit for the country of 853.7bn yen ($10.6bn; ?6.6bn), the ministry said.

It is Japan's second-biggest trade deficit after a 967.9bn yen deficit in January 2009.

View the original article here

Japan car firms hire to up output

21 June 2011 Last updated at 06:17 GMT Japanese car makers have been suffering a shortage of parts and therefore operating at reduced capacity Japanese car firms will boost production by hiring thousands of contract workers in the aftermath of the March earthquake and tsunami.

Toyota Motors has said it will take on up to 4,000 workers starting in July, after a plunge in Japanese production of almost 75% in April.

Honda said it will hire about 1,000 contract workers and Nissan about 200.

Japan's car makers have been facing supply chain disruptions and power shortage problems since the disaster.

Toyota said that in Japan it will be back to 90% pre-earthquake production levels in June and close to 100% from July onwards.

"By July we'll be back at monthly production levels. But we still have to make up for those units we lost over the last couple of months," said Toyota spokesman Dion Corbett.

"This [hiring] drive is primarily to make up for lost production."

The sentiment is echoed by the other car makers.

Honda, which also saw a dive in production after the earthquake, said it was hiring on 3-months contracts.

"When production went down to 50% we had stopped some contracts for some temporary workers. Therefore to increase production, we are increasing hiring," said spokesperson Akiko Itoga.

The 9.0 magnitude earthquake and subsequent tsunami destroyed entire towns and disrupted electricity-generating facilities, including the Fukushima nuclear power plant.

This led Japanese car firms to announce production disruptions, both domestically and overseas, because of plant closures and slowing output.

Toyota forecasts it will suffer 450,000 units of lost production this fiscal year which ends on March 31, 2012, according to Mr Corbett.

Approximately 220,000 units of Toyota and Lexus production were lost globally between March 11 through to the end of that month.

Therefore. the global impact of the earthquake on Toyota is approximately 670,000 units.

View the original article here

Japan air travel slumps in April

2 June 2011 Last updated at 06:08 GMT The travel industry has been hit by the destruction caused to infrastructure by the quake and tsunami Japan's air travel industry has been hit by the earthquake and tsunami according to the International Air Travel Association (IATA).

Japan's domestic air travel fell 31% in April, compared with the same month a year ago, the latest figures show.

IATA said international traffic to Japan was down by about 20%.

Widespread destruction and fears of a nuclear crisis at the Fukushima Daiichi plant have hurt travel demand in the country.

Domestic demand grew in China, but at a slower rate.

Its domestic market grew by 10.8% in April, compared with 15% growth during the same month last year.

Giovanni Bisignani, IATA's Director General said growth in China slowed: "as a result of tighter economic policies".

International travel There was some good news for the industry as IATA said that international air travel grew by 16.5% in April, compared with last year.

"Demand improved significantly in April. Eliminating all distortions, we are growing at 3-4%," said Mr Bisignani

"International traffic is now 7% above the early 2008 pre-recession levels," he added.

The numbers were boosted by a spike in European air travel, which grew by 29%.

However, IATA said that Europe's numbers were high as travel in the region was severely affected last year by the volcanic ash crisis.

Despite the encouraging numbers, IATA warned that there were tough times ahead.

"Despite the enormous restructuring over the last decade, the industry is not shock-proof," said Mr Bisignani.

"Maintaining the high load factors needed to support profitable growth will be difficult, given the ongoing challenge of matching capacity to volatile demand," he added.

Mr Bisignani also said that the industry's profit margins had been hit by a series of crises and natural disasters in the first half of this year and that is likely to have an effect on growth.

View the original article here

Japan beats deflation in April

27 May 2011 Last updated at 09:37 GMT Japan has been fighting falling prices for more than a decade Japan has beaten deflation for the first time in two years, as fuel imports surged following the earthquake and tsunami.

Consumer prices rose by 0.6% in April, from a year earlier, according to the Statistics Bureau.

However, credit ratings agency Fitch has downgraded its outlook on Japan's debt to negative from stable.

Fitch said it was worried about the high levels of Japanese government debt.

"Japan's sovereign credit-worthiness is under negative pressure from rising government indebtedness," said Andrew Colquhoun of Fitch.

"A stronger fiscal consolidation strategy is necessary to buffer the sustainability of the public finances against the adverse structural trend of population ageing."

In January this year, rating agency Standard & Poor's downgraded Japan's credit rating from AA to AA-, also citing Japan's worsening debt situation for the move.

One-off?

The rise in Japan's core consumer price index in April, which excludes food prices, was largely in line with expectations.

Including food, consumer prices rose by 0.3% in April, compared with a year earlier.

Japan has been battling deflation, or falling prices, for more than a decade.

Continue reading the main story

Although I expect consumer spending will recover in May and the months ahead in the wake of the disaster, wages and salaries haven't risen.”

End Quote Hiromichi Shirakawa Chief economist, Credit Suisse While potentially positive for bargain-hungry shoppers, deflation actually leads to companies and most consumers putting off purchases, in hopes that prices will continue to fall.

The April data is unlikely to reverse that trend, because the gains came largely from higher fuel prices.

The 11 March earthquake and tsunami left more than 24,000 people dead or missing.

It also destroyed some of Japan's ability to generate electricity.

The country has been importing large amounts of fuel in order to make up the difference.

"The commodities and crude oil prices are pushing the inflation figures up," said Credit Suisse chief economist Hiromichi Shirakawa.

"Although I expect consumer spending will recover in May and the months ahead in the wake of the disaster, wages and salaries haven't risen."

He added: "I'm concerned about consumer spending towards the summer".

Japan's economy, the world's third largest, has slid back into recession after the devastation caused by the earthquake and tsunami.

Gross domestic product shrank 0.9% in the first three months of the year.

Japan's economy has now contracted for two quarters in a row, the generally accepted definition of a recession.

View the original article here

Japan economy back in recession

19 May 2011 Last updated at 07:09 GMT Japan is struggling to restore damaged production lines Japan's economy, the world's third largest, has slid back into recession after the devastation caused by the earthquake and tsunami in March.

Gross domestic product shrank 0.9% in the first three months of the year, the Cabinet office said, giving an annualised rate of contraction of 3.7%.

Analysts say consumption and exports were worst hit.

Japan's economy has now contracted for two quarters in a row, the generally accepted definition of a recession.

Japan sank into a recession during the global financial crisis, but had emerged from it in 2009.

The contraction in the first three months of this year was bigger than expected, with most analysts expecting the annualised rate would show a contraction of about 2%.

"Japan's economy is expected to remain weak for the time being," said Japanese Economics Minister Kaoru Yosano on Thursday.

However, Mr Yosano said that supply constraints were easing and reconstruction demand was likely to spur growth.

"The economy has the strength to bounce back," Mr Yosano said.

Pessimistic consumers

Naomi Fink, Japan Strategist at Jefferies, said the most worrying part of the latest data was the decline in private consumption of 0.6%, as people cut their spending after the earthquake.

Private consumption accounts for almost 60% of the Japanese economy.

Roland Buerk reports from Tokyo on Japan's attempts to deal with power loss caused by the earthquake

"It was already soft in the final quarter of 2010," said Ms Fink.

The earthquake, however, has further dampened sentiment.

The consumer confidence index fell to 33.1 in April, according to the Cabinet Office, where a reading below 50 suggests consumer pessimism.

"Judging by the drop in retail sales and household expenditures over March, consumption should be one of the greater contributors to negative growth in the first quarter," said Ms Fink.

Damaged supply chains

The second biggest component of the world's third largest economy is trade.

Exports made up 13.5% and imports 12.7% of gross domestic product in 2009.

The massive earthquake and tsunami devastated exports, while the costs of imports rose due to high commodity prices.

Japan's trade surplus fell by 34.3% in March compared with the same month a year ago.

"One issue on the export side is the ongoing struggle to restore damaged production lines and supply chains," said Ms Fink.

"On the import side, the increase in demand for fossil fuels, to offset the drop in supply of nuclear energy, is unlikely to fade anytime soon," she added.

Reconstruction demand

Once rebuilding gathers momentum, however, it should have a positive impact on the economy.

But that is only likely to happen towards the end of this year.

"I do not expect positive growth in the second quarter," said Ms Fink.

The country's central bank begins its two-day meeting on Thursday to discuss its monetary policy.

"Japan's economic strength is gradually declining," Bank of Japan (BOJ) governor Masaaki Shirakawa told a parliamentary committee meeting on Tuesday.

Analysts say this signals that the central bank will stick to its ultra-loose monetary policy.

The bank has pumped billions of dollar into the financial system to stabilise the economy since the massive earthquake.

The BOJ is expected to keep the rates unchanged at the lowest level in a range of 0.0% to 0.1%, to help stimulate the economy.

View the original article here

Thursday and Friday is the new weekend in Japan

19 May 2011 Last updated at 09:58 GMT Japan's companies have been asked to reduce power consumption by 15% Japan's carmakers have agreed to work over the weekend and close their factories on Thursdays and Fridays.

It will mean they can use energy at off-peak times and help to avoid power shortages.

Japan has lost some of its capacity to generate electricity as a result of the earthquake and tsunami on 11 March.

The changes are due to take effect between July and September when the use of air conditioning puts a greater strain on power supplies.

The announcement was made by the Japan Automobile Manufacturers Association.

"On Saturdays and Sundays, power supplies are adequate and we can conduct production without limitations," its chairman Toshiyuki Shiga said.

He added that the change was a way to "limit power consumption without disruption to production".

Some companies may also ask their back-office staff to work through the weekends and take the same days off.

Japan's government has asked major companies to reduce their electricity use by 15%.

Other energy-saving measures have included reducing lighting in corridors, turning down air conditioning and switching off escalators.

View the original article here

Japan consumer mood falls sharply

16 May 2011 Last updated at 05:38 GMT Japan's economy needs deregulation in order to create new jobs, says Richard Jerram of Macquarie Securities

The mood of consumers in Japan deteriorated further in April, a survey has found, as the fallout from the devastating earthquake and tsunami continued to weigh on sentiment.

The consumer confidence index fell to 33.1, down from 38.6 in March, according to the Cabinet Office.

A reading below 50 suggests consumer pessimism.

However, analysts say that there are signs that confidence is beginning to recover.

'Bounce' hopes

Even people in parts of Japan not affected by the 11 March earthquake and tsunami, like Tokyo and western Japan, have been cutting back on spending.

"People refrained from spending money on going to amusement parks or drinking and eating to respect those living in disaster areas," said Masaki Kaano, chief economist at JP Morgan Securities.

However, analysts say consumer confidence was on the rise at the end of April, and could recover next month.

Continue reading the main story

If the government doesn't manage the nuclear power plant issue well and if there is bad news from there, people's sentiment may turn bad”

End Quote Masaki Kaano JP Morgan Securities "There is no massive downward trend and there are signals of a bounce," said Naomi Fink, Japan strategist at Jefferies in Tokyo.

"We're not going to see several consecutive courses of deterioration."

Spending is likely to rebound, as consumers' concerns are not centred around job security - as they were in the aftermath of the global economic crisis in 2008, said Ms Fink.

Energy squeeze

There are signs that consumer mood was already recovering at the end of April, which coincided with the start of a week-long holiday in Japan called Golden Week.

Another factor lifting spirits has been the end of the Buddhist mourning period.

In Buddhism during the first seven weeks, or 49 days after a death, families and close friends are expected to refrain from entertainment.

The 49th day after the disaster was on 28 April, which means many people were only in the mood to spend after that.

The 9.0 magnitude earthquake and subsequent tsunami killed more than 15,000 people, according to the national policy agency.

"Consumer sentiment changed positively when Golden Week started, and that uptrend remains unchanged into May," said Mr Kaano.

But while analysts are optimistic, there are still some potential risks on the horizon that could affect consumers' likelihood to spend.

Businesses have been asked to cut back on electricity usage by 15% during the summer, when power consumption is at its peak.

Businesses in Tokyo experienced rolling blackouts in the week following the earthquake

Even worse, the nuclear crisis continues to weigh on sentiment.

Work at the Fukushima Daiichi plant was hit with another setback last week after a water leak was found in one of the reactors.

Tokyo Electric Power, the utility that runs the power plant, has said it hopes to stabilise the reactors by January.

Some experts think that a delay in that schedule is now likely.

"If the government doesn't manage the nuclear power plant issue well and if there is bad news from there, people's sentiment may turn bad," said Mr Kaano.

View the original article here