By Aki Ito Aug. 31 (Bloomberg) — Japanese manufacturers increased output in July at the slowest pace in four months as effects of the global stimulus and inventory restocking began to fade. Production climbed 1.9 percent from June, when it rose 2.3 percent, the Trade Ministry said today in Tokyo. Economists surveyed by Bloomberg News expected a 1.4 percent gain. July’s increase marked the third month of decelerating growth, signaling a recovery from the nation’s worst postwar recession may be gradual. Sustaining a rebound will be a challenge for the Democratic Party of Japan, which ousted the Liberal Democratic Party out of power in yesterday’s general election. “Production so far has been boosted by pent-up demand, global stimulus measures, and inventory adjustments. These effects will be temporary,†said Azusa Kato , an economist at BNP Paribas in Tokyo. “Exports to Asia have already slowed, and so production may slow earlier than we initially expected.†Toyota Motor Corp. , Japan’s largest automaker, said last week it plans to reduce output by about 220,000 vehicles. The automaker cut domestic production by 29.5 percent in July. Today’s report adds to evidence that the economy is losing momentum since it emerged from a recession last quarter. Data last week showed the jobless rate reached a postwar high of 5.7 percent in July and household spending fell at the fastest pace in five months. As the effects of the stimulus begin to wane, the deteriorating job market makes it unlikely that domestic demand for manufactured products will recover. Record Plunge Manufacturers trimmed production at a record pace in the first quarter in the wake of the global financial crisis. The cuts left them with leeway to rebuild stockpiles as demand recovers. “Companies reduced their inventories by a considerable amount, and they are still rapidly rebuilding that loss,†said Yoshiki Shinke , senior economist at Dai-ichi Life Research Institute. There are signs that plunges in overseas demand are stabilizing, paving the way for sustained increases in output later this year, economists say. “Overseas demand will improve in small increments,†said Junko Nishioka , chief economist at RBS Securities Japan Ltd. in Tokyo. Exports fell 36.5 percent in July, a report last week showed. Declines have stabilized since demand plunged a record 49 percent in February. Panasonic Corp. , the world’s largest maker of plasma televisions, raised its earnings forecast for the first fiscal half, projecting its net loss to be 100 billion yen, from an earlier estimate of 195 billion yen. Some 25 trillion yen in Japan’s stimulus spending has included incentives for consumers to buy fuel-efficient cars and eco-friendly home appliances. Shipments of flat-panel TVs, which qualify for the government’s “eco-point†incentives, rose 41 percent in July from a year earlier, the Japan Electronics and Information Technology Industries Association said last week. To contact the reporter on this story: Aki Ito in Tokyo at aito16@bloomberg.net
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Japan’s Industrial Output Rises at the Slowest Pace in Four Months in July
