The industrial output in Japan fell to the 53-year low in November 2008, indicating to the dawn of recession in the country.
According to the Ministry of Economy, Trade and Industry, the industrial output in Japan tumbled 8.5% on seasonally-adjusted basis during November 2008 against October 2008, as reported by BBC.
The slump in industrial output was higher than initial estimation of 8.1% decline and was the highest since 1953 when comparable record started. The country’s output dropped 16.6% in November 2008 against the same month a year ago. Excluding orders from shipbuilders and electric power companies, machinery orders and core private sector dropped 16% from October 2008. The production index of factories and mines stood at 93.6 compared to the base of 100 in 2005.
Moreover, Japanese machinery orders, a barometer to measure the corporate spending activity, declined to the lowest on the monthly basis during November 2008.
The industrial output was bound to slump with falling demand for Japanese products in domestic as well as international market. Liquidity crunch in the financial market is affecting the accessibility to credit, translating into weak consumer purchasing power and low demand. Moreover, Japanese exporters have been severely hit by appreciation in Yen against dollar, affecting the industrial output of the country.
Declining industrial output indicates to worsening situation of recession in the country, though the Bank of Japan and Japanese government have been trying to boost the economy by increasing public spending and reducing interest rates.
Moreover, declining production is also leading to an increase in unemployment. Companies are resorting to downsizing to curb their losses; as a result, the unemployment rose from 3.7% in October 2008 to 3.9% in November 2008.
According to the Ministry of Economy, Tokyo is determined to take appropriate fiscal measures to deal with deteriorating economic conditions.
According to a Research Analyst at RNCOS, “The economic situation is further worsening with declining industrial output in Japan. As the exports of Japanese products hit by the global economic slowdown, companies are halting their operations at manufacturing utilities and slashing jobs, which, in turn, is affecting the domestic consumption. The core inflation may even slip into negative territory in January 2009 due to deteriorating conditions.”
