Japan industrial production up before quake

Thursday, 31 March 2011 00:10 - - {{hitsCtrl.values.hits}}

OSAKA, (AFP) - Japan’s industrial production rose for a fourth straight month in February, data showed Wednesday, in another sign the economy was picking up before a devastating earthquake and tsunami.

Factory output increased a seasonally adjusted 0.4 percent in February from the previous month as production of machinery increased, the Ministry of Economy, Trade and Industry said.

The result beat the median forecast for a 0.2 percent drop in a poll of economists surveyed by Dow Jones Newswires and the Nikkei and marked the fourth straight month of gains following a 1.3 percent rise in January.

Recent data has bolstered the view that before the March 11 quake, Japan’s economy was staging a rebound after contracting in the October-December quarter. Unemployment fell to its lowest level in two years in February.

However, the earthquake and ensuing tsunami that hit northeastern and eastern regions is expected to severely impact production in the next few months, amid power outages and supply chain disruption.

Around 28,000 people are confirmed dead or listed as missing in Japan following the disaster.

Infrastructure along the northeast coast has been shattered, while rolling power outages have hit production with companies closing plants temporarily. Exports of key components and equipment used in the assembly of goods abroad have also been hit, sending shockwaves across global markets.

Factory damage and continuing power outages mean industrial output will likely fall 3-4 percent on-month in March, and 1-2 percent in April, smothering economic growth ahead, said Takuji Aida, senior economist at UBS Securities Japan.

“The auto sector is the biggest concern, given its centrality to manufacturing and exports, and the severity of some of the production cuts there,” he told Dow Jones Newswires.

Japan last week said the cost of rebuilding after the twin disaster could hit 25 trillion yen ($309 billion), more than double the 1995 Kobe earthquake and nearly four times more than Hurricane Katrina in the United States.

The estimate does not account for wider issues such as how radiation from the Fukushima Daiichi nuclear plant, which was crippled by the quake, will affect food and water supply, amid a deepening contamination scare.