Production Cuts in Japan Deeper Than Expected
Japanese companies trimmed production more than expected in September as the terrorist attacks on the U.S. deepened a slump in overseas orders and consumers at home spent less.
Industrial production fell 2.9% from August, seasonally adjusted, the Ministry of Economy, Trade and Industry said today. That was more than the 2.5% decline economists expected. Production fell 12.7% from a year earlier, the biggest drop since May 1975.
Car makers such as Honda Motor Co. and Toyota Motor Corp. led last month’s decline. Fuji Electric Co. and other machinery and electronics makers also scaled back as overseas orders for computers, phones and other goods fell. Falling exports, along with stalled consumer spending, have pushed the world’s second-largest economy into its fourth recession in a decade.
“The outlook for production is bleak, as Japan can no longer rely on overseas demand,” said Kazuhiko Ogata, a senior economist at HSBC Securities (Japan) Ltd. “With some impact also coming from the terrorist attacks, the decline came in larger than expected.”
Japan’s exports fell 4.6% in September from August, the fifth decline in six months, led by falling sales to the U.S.--Japan’s biggest market--and waning global demand for electronic parts.
Production cuts have become so routine at Japanese companies that Fuji Electric never formally announced a decision this year to slow assembly lines at two machinery parts plants, giving workers one-day furloughs every couple of weeks.
Consumer spending, which makes up 55% of Japan’s economy, isn’t pulling its weight. Retail sales fell for a second quarter in the July-to-September period, a report showed last week. Gross domestic product probably also shrank for a second quarter during the period and probably will decline 1.1% in the year ending March 31, according to a Bloomberg News poll.
Unemployment, already at a record 5% in August, probably climbed to 5.1% last month, economists forecast. Japan’s manufacturers are trimming purchases of equipment and materials in anticipation of a further drop in sales, pointing to further production cuts among their suppliers.
