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Wednesday, 29 May, 2002, 05:22 GMT 06:22 UK
Japan recovery 'still on track'
Tokyo Stock Exchange
The latest figures pushed the Tokyo stock market lower
Japanese industrial output grew more slowly than expected last month, but a sharp reduction in stockpiled goods has kept hopes of an economic recovery alive.

Figures from Japan's Ministry of Economy Trade and Industry on Wednesday showed that industrial output edged just 0.2% higher in April from March, far below the 0.9% growth predicted by analysts.

But a 10.6% drop in unsold stocks compared with April 2001 - the steepest decline in almost fifty years - provided some reassurance that Japan's fragile economic recovery is still on track.

The depletion of stockpiled goods means that manufacturers are more likely to place fresh orders for raw materials, boosting demand in the wider economy.

Cheap yen

Credit Suisse First Boston chief economist Yasushi Okada described the output figures as "very weak."

"But inventories are disappearing very, very fast. I think this is not such bad news," he added.

The latest figures follow news of a surprise 0.8% increase in industrial output for March, prompting speculation that Japan's stagnant economy was on the road to recovery.

With domestic demand remaining weak, economists are pinning their hopes for a Japanese revival on increased overseas demand.

Japan's trade ministry said on Wednesday that strong export demand for cars and electronic components was underpinning the manufacturing sector's performance.

It said that industrial production is "showing signs of recovery."

April's figures mark the third consecutive month of output growth.

But investors reacted cautiously to the figures, marking the yen down against the dollar and pushing the benchmark Nikkei stock index to a lower close.


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