Dec. 26 (Bloomberg) — Japan’s industrial production fell the most in at least five years in November after exports dropped by a record.
Factory output tumbled 8.1 percent from October, when it dropped 3.1 percent, the Trade Ministry said today in Tokyo. The median estimate of 36 economists surveyed by Bloomberg News was for a 6.8 percent decline.
Plunging demand for cars and electronics is prompting companies to pare output, jobs and investment. Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co., Japan’s three largest carmakers, cut global production in November and chipmaker Renesas Technology Corp. yesterday said it would eliminate all of its 1,000 temporary workers.
“The recession is showing signs of growing longer and more severe,” said Tetsufumi Yamakawa, chief Japan economist at Goldman Sachs Group Inc. in London. “Production is showing stronger signs of a correction in conjunction with a slump in demand in Japan and abroad.”
Separate reports today showed the unemployment rate rose to 3.9 percent from 3.7 percent, households cut spending for a ninth month and inflation slowed to the weakest since April.
Exports declined 26.7 percent in November from a year earlier, the sharpest drop since comparable data were made available in 1980, a government report showed this week. Sentiment among large manufacturers fell the most in 34 years, the Bank of Japan’s quarterly Tankan survey showed.
Bank of Japan
Mounting evidence of a weakening economy prompted the Bank of Japan to last week cut interest rates to 0.1 percent from 0.3 percent, increased purchases of government debt and announced plans to buy commercial paper for the first time.
The yen’s 23 percent gain against the dollar this year is also eroding exporters’ profits and adding to their woes. Japan’s currency surged to a 13-year high of 87.14 on Dec. 17.
Toyota Motor, the world’s second-biggest automaker, said on Dec. 22 that it forecast its first operating loss in 71 years in the 12 months ending March. Every 1 yen gain against the dollar and euro trims Toyota’s annual operating profit by 40 billion yen and 6 billion yen, according to the company.
Japanese carmakers have been hit by the recession in the U.S., where consumer credit is drying up and households are spending less. The U.S. economy, the world’s largest, shrank at the fastest pace since 2001 last quarter.
To contact the reporter on this story: Keiko Ujikane in Tokyo at [email protected]
Last Updated: December 25, 2008 18:54 EST
By Keiko Ujikane