TOKYO: Japanese factory output contracted in February, data showed yesterday, a surprise decline that highlighted the uneven economic recovery in the world’s number three economy as consumers brace for a sales tax hike.
The 2.3 percent fall in output from January — the first decline in three months — is likely to aggravate concerns about the potential impact of the increased levy, which takes effect today. There are fears that the tax rise to 8 percent from 5 percent — seen as crucial to paying down Japan’s huge national debt — will weigh on consumer spending and derail a budding recovery.
The last time Japan brought in a higher levy in 1997, it was followed by years of deflation and tepid economic growth.
Prime Minister Shinzo Abe faces a tricky balancing act as he tries to nudge the economy out of a cycle of falling prices and lacklustre growth with a growth blitz dubbed Abenomics.
Falling production of large passenger cars and auto parts led the decline in February’s factory output, underscoring how exports and domestic spending remain wobbly. A producers’ survey released with the government data show manufacturers expect a rise in March industrial production followed by a decline in April as the effects of the tax hike become clearer.
“Industrial production continues to show an upward movement,” said the economy, trade and industry ministry. However, the weaker-than-expected data will mean a renewed focus on the Bank of Japan’s widely watched Tankan quarterly business confidence survey, set to be released Tuesday. AFP
