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Japan's factory output up while retail sales shrink

(Credit: KAZUHIRO NOGI/AFP/Getty Images) :A pedestrian looks at an electric quotation board showing share price indexes of the Tokyo Stock Exchange in front of a securities company in Tokyo on February 29, 2016. Tokyo shares opened higher February 29, shrugging off a fall on Wall Street as Nissan shares surged the most in seven years on news the company will buy back some of its stock. JAPAN-STOCKS
February 29
3:27 AM 2016

Surpassing forecasts, industrial production in Japan rose during January 2016, while retail sales took a dip at 1.1 percent . The latest situation in the world's third largest economy indicates uncertainty about gross domestic product (GDP) growth rate. 

The latest data about the first month of 2016 revealed a turnaround in the manufacturing sector. The fall in industrial production was less than the forecast, giving positive signals about the financial performance in the days to come. The factory output fell 3.8 month in January 2016 when compared to January 2015. 

The New York Times reports that economists predicted a fall of 5.2 percent in February 2016 owing to sluggish world economy. It is now anticipated that the global economy growth rate may be under pressure throughout 2016. Japan's central bank has commenced a negative interest rate policy to five a boost to banks' lending spurring business activity. 

Marcel Thieliant of Capital Economics said "The rebound in industrial production in January is unlikely to assuage concerns about the health of Japan's economy as firms are predicting a renewed slump in February."

Despite the rebound in January 2016, the outlook for industrial production throughout 2016 looks uncertain. Retail sales suffered loss for the first time since 2012. The drop in retails during the quarter indicated a cloudy scenario over Japan's economy.

Factory output rose 3.7 percent  against the forecast of 3.2 in January and it fell 1.7 percent in December. Economists predict a drop of 5.2 percent in February and rise of 3.1 percent in March, as reported by Bloomberg.

Retail sales in Japan eased 1.1 percent during January 2016 and it was much steeper 4.3 percent in the previous corresponding month. Japan's manufacturing index was 99.8 in January 2016 from 200 in 2010. Prime Minister Shinzo Abe has been implementing several measures to boost the country's monetary performance, enhance government spending and speeding up reforms process. 

Contrary to a forecast of 0.1 percent growth by economists, Japan's retail sales fell 1.1 percent on month-on-month basis from 0.3 percent drop in December and negative 0.2 percent in November. Japan witnessed continuous drop for third consecutive month in January. This made a year-on-year loss at a negative -0.1 percent, according to Financial Times.

Japan's government is keen on boosting banks' lending to fend off deflation especially after the inflation rate was flat during January. Meanwhile, last weekend's G20 meeting called for easing recession. Several finance ministers from developed nations insisted exploring all the possible measures to come out of recession. The G20 meeting has evolved a three-pronged strategy for monetary boost, government spending and reforms. 

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