Japanese production in historic plunge amid global slump

Published by rudy Date posted on December 27, 2008

TOKYO (AFP) — Japanese production fell at the fastest rate on record in November as firms closed factories and cut jobs due to slumping demand brought on by the global economic crisis, according to the latest data.

Industrial output in the world’s second largest economy plunged a record 8.1 percent in November from the previous month, while unemployment rose as workers on temporary contracts lost their jobs.

It was the biggest drop in industrial output since the Ministry of Economy, trade and Industry began releasing the statistics in 1953 and was much worse than market forecasts of a 6.7 percent fall.

Kaoru Yosano, the economy minister, warned that it was difficult to see when Japan would break out of its recession.

“The public, business people and politicians, we all must give our all so that the economy would not nosedive even below its lowest point,” Yosano said.

Production is likely to continue falling, with the ministry expecting an 8.0 percent drop in December and another 2.1 percent decline in January, as the auto industry feels the pinch.

The data came as brand-name Japanese manufacturers, including Toyota Motor Corp., Sony Corp. and Canon Inc., lowered production and cut jobs to adjust to the fall in demand for their exports.

The meltdown is likely to continue for the time being, said Hiroshi Watanabe, economist at Daiwa Research Institute.

“We have been seeing economic data and forecasts downgraded every month,” he said.

“From now on, I expect the weak exports will lead to a serious inventory adjustment. Shipments are weak, increasing the inventory. This in turn again lowers production,” he said.

Japan relies on exports as the key driver of its economic growth, but overseas-bound shipments also fell at their fastest-ever rate in November.

The trend would further deteriorate employment in a relatively short time, causing severe economic pain, Watanabe said.

Unemployment rose to 3.9 percent in November, worsening 0.2 percentage points from the previous month, the internal affairs ministry said Friday.

The figure was slightly below average market forecasts of 4.0 percent.

The number of people out of work increased by 100,000 from a year earlier to a total of 2.56 million.

“These figures are extremely serious,” Chief Cabinet Secretary Takeo Kawamura said.

He said the government would work hard to pass through parliament its record-high budget unveiled this week in a bid to boost the economy.

The job cuts have targeted mainly people on limited-term contracts or those who were recruited from temp agencies.

The labour ministry said that a total of 85,012 temporary workers have already lost their jobs or know they will be laid off by March.

The figure nearly trebled in a month, reflecting the rapid deterioration of the employment environment for people without permanent contracts, a health ministry official said.

“We expect the figure to rise even further towards the year end and the end of the fiscal year” in March, he said.

In other data, Japan said that core consumer prices rose 1.0 percent in November from a year earlier although they eased by 0.8 percent from the previous month.

Japan for a decade battled deflation, or falling prices, which sapped growth from the economy. Core consumer prices have now been rising for more than a year, albeit at a slower pace than before as global energy prices come down.

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