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Economy in Brief

Japan's Industrial Sector Slows Down, Does the Economy?
by Robert Brusca March 13, 2008

Japan’s index of industrial output was revised lower. But the general growth trend remains in force. Year/year output trends are fairly stable at a moderate 2% or so rate of growth. Over six months, trends point lower; over 3 months trends point sharply lower.

All major industrial and product growth sectors show weakness in the recent one-month and three-month periods. Textiles, investment goods and mining show the more persisting decelerating trends.

However, different leading indicators tell different stories about Japan’s economy and where it is going. The OECD sees an upturn in progress in six months, as its CLI has turned higher. Japan’s own leading index is still locked in a downtrend going back to 2006.

The recent surge in the yen comes against this mixed background. In the past the yen has not been able to rise strongly unless the domestic economy was doing well. But in this case the yen’s rise is the counter part of the dollar’s ubiquitous fall. The yen may be driven more by the US and by yen funding unwinds than by Japan’s own fundamentals. The BOJ is not talking of intervention, indeed, the Keidanren, the influential Japan employers union, said it would not ask for intervention unless the dollar got much stronger.

Japan’s exports have been holding up and there is some talk of improved productivity in Japanese companies. But the dollar’s move up could put all of this in jeopardy. Year-over-year output trends remain steady but over shorter horizons we do have something to think about.

Japan Industrial Production Trends
  m/m % Saar % Yr/Yr
seas adjusted Jan-08 Dec-07 Nov-07 3-mo 6-mo 12-mo Yr-Ago
Mining & MFG -2.2% 1.4% -1.6% -9.3% 2.6% 2.2% 3.2%
Total Industry -2.6% 1.7% -1.3% -8.6% 3.4% 2.3% 2.6%
MFG -2.2% 1.4% -1.6% -9.6% 2.6% 2.1% 3.2%
Textiles -3.0% 2.5% -2.2% -10.2% -8.6% -5.6% -4.2%
Transport -3.2% 2.4% -2.9% -14.2% 31.5% 11.6% 4.6%
Product Group
Consumer Goods -1.7% 2.1% -2.1% -6.8% 12.8% 4.0% -0.8%
Intermediate Goods -2.8% 1.3% -1.1% -10.3% 3.1% 4.0% 3.8%
Investment Goods -0.8% -0.6% -1.9% -12.6% -8.3% -3.8% 5.8%
Mining -2.9% 1.1% -5.9% -27.2% -15.9% -5.1% 3.5%
Electricity & Gas -1.9% 0.2% 2.0% 1.0% 14.0% 5.3% -2.8%
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