Roundup: Japan's factory output jumps 3.7 pct in Jan., broader fundamentals continue to weigh

Japan's industrial output rose a seasonally adjusted 3.7 percent on month in January, marking the first rise in three months, accelerating from a 1.7-percent drop logged a month earlier, the Ministry of Economy, Trade and Industry said Monday.

According to the ministry's preliminary report, factory output came in ahead of median market forecasts for a 3.2 percent increase, with the index of output at factories and mines standing at 99.8 against the base of 100 in 2010.

The latest data showed that production notably increased in the recording period of general-purpose equipment, business oriented machinery, transport equipment and the manufacturing of electronic parts and devices.

The growth in production marks the quickest increase since the same month a year ago, but on an annualized basis factory output contracted 3.8 percent on year in January, following a 1.9 percent drop in December, although the figure was in line with analysts' expectations.

According to the ministry, industrial shipments saw an uptick of 3.4 percent to 97.9 in the recording period, while inventories retreated 0.3 percent to 112.0.

The inventory ratio dropped 2.1 percent from the previous month, the data showed, declining for the first time in three months, but marking a 4.2-percent increase from the previous year on a seasonally-adjusted basis, standing at 113.6.

While maintaining its basic assessment of production stating that the trend of output is fluctuating without clear direction, the ministry said, according to its survey of production forecast, output is expected to decrease 5.2 percent in February and increase 3.1 percent therafter in March.

The latest figures follow an economic contraction logged in the last quarter on falling domestic consumption and a slump in exports, with economists saying Friday the figures suggested some improvement in overseas demand which has dipped, but pointed out that some economic fundamentals like the flat inflation rate, in January, a global drop in oil prices and the yen's appreciation, could lead to further easing measures by the central bank.

The mixed signals were also compounded Monday by data showing that retail sales fell 1.1 percent in January from a month earlier and were down 4.3 percent from the previous year, stoking concerns about decreasing consumer spending, which accounts for a significant portion of national gross domestic product.

A raft of economic data is due out Tuesday, including wage-related figures, household spending and the jobless rate in Japan, which is keenly being eyed by ministry officials and economists alike for signs of the health of the world's third-largest economy and whether or not it is staging a minor rebound or headed for recession.

Credit Agricole's chief economist, Kazuhiko Ogata, was quoted as saying that while production was better than anticipated, the economy is struggling to contend with a weakness in domestic consumer spending as well as in the global economy, which is stoking public fears here about the efficacy of Prime Minister Shinzo Abe's "Abenomics" blend of economic policies.

Concerns have grown in the wake of the Bank of Japan plunging its interest rate into negative territory in a bid to to encourage funds to flow into the economy, as part of its reflationary efforts and to shore up the economy, which, if it contracts in the current quarter will mark a technical recession.

The bank has signaled it may further lower its interest rate, in moves similar to the European Central Bank, as deflationary pressure looms, with broader economic pressures on Japan potentially being influenced by the U.S. Federal Reserve holding fire on a subsequent rate hike. Endit