Japanese production rises again

Cars for export are parked at a Yokohama port, near Tokyo. File photo

Car production rose sharply during May

Japanese industrial output increased 5.9% in May compared with the month before, the third consecutive monthly climb, according to official data.

The rise last month was the same as April's revised figure, though less than analysts' forecasts of 6.9%.

The output of cars, mobile phones and electronic devices was particularly strong as firms started to reverse earlier cuts in stock levels.

But analysts predict output could slow again, as the world downturn continues.

"Production has been rebounding sharply in response to earlier drastic cuts but the momentum is likely to slow in the months ahead," said Hirohi Watanabe, an economist at the Institute of Research.

Manufacturers predict industrial output to rise by a 3.1% in June and climb 0.9% in July.

Japan, which is heavily depending on exports, entered a recession in the second quarter of 2008.

Despite the recent rise, industrial output in May was about 30% lower than it was in the same month last year.

And the growth predictions for the next two months would still put output at more than 20% lower year-on-year.

Deflation worries

The latest industrial output figures showed car production rose by 24.8% in May from the month before, and electronic parts production increased by 10.5%.

Firms in both sectors had cut the number of shifts workers are doing in an attempt to lower inventory levels, but they are now beginning to reverse that trend.

However, according to separate data from Japan's Automobile Manufacturers Association, auto production in May was still down 41.4% from a year ago at 542,282 vehicles.

Last week, Ministry of Finance figures showed prices in Japan fell by the most on record last month, raising fears of a new episode of deflation.

Consumer prices fell 1.1% in May from the same month a year ago, the most since records began in 1970.