Japanese Companies Cut Production The Most In 55 Years

To put things into context: 2008 - 55 = 1953

The sharpest contraction in Japanese factory production since 1953....

http://www.bloomberg.com/apps/news?pid=20601087&sid=a8HsMxADEi6o&refer=home

Japan’s Recession Deepens as Factory Output Plummets (Update2)


By Keiko Ujikane and Toru Fujioka

Dec. 26 (Bloomberg) -- Japan’s recession deepened in November as companies cut production at the fastest pace in 55 years and rising unemployment prompted households to pare spending.

Factory output plunged 8.1 percent from October, the Trade Ministry said today in Tokyo, more than the 6.8 percent estimated by economists. The jobless rate climbed to 3.9 percent from 3.7 percent. Household spending slid 0.5 percent, a ninth drop.

Simultaneous recessions in the U.S. and Europe have weakened demand for Japan’s exports, prompting companies from Toyota Motor Corp. to Sony Corp. to idle plants and fire workers. The Bank of Japan has little room to spur the economy after cutting interest rates close to zero last week, and Prime Minister Taro Aso has yet to implement two stimulus packages.



“We’re not at the worst yet,” Kyohei Morita, chief Japan economist at Barclays Capital in Tokyo, told Bloomberg Television. “In terms of the stimulation of the real economy, what matters is fiscal policy, not monetary policy.”

The yen traded at 90.43 per dollar as of 1:26 p.m. in Tokyo from 90.46 before the reports. The Nikkei 225 Stock Average rose 0.8 percent. The gauge has lost 43 percent this year, heading for its worst annual decline. The yield on Japan’s 10-year bond fell 2 basis points to 1.195 percent, matching a three-year low.

The decline in production was the biggest since comparable figures were first made available in February 1953. Shipments also fell the most on record. The ministry downgraded its assessment of output, saying it’s “declining rapidly.”

No End in Sight

There’s no end in sight to the recession that began when the economy shrank in the past two quarters. Companies surveyed by the ministry planned to reduce output a further 8 percent this month and 2.1 percent in January. Should December’s forecast be realized, production would slide a record 11.1 percent this quarter.

“The output numbers were just horrible,” said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. “Economic conditions are going to deteriorate rapidly.”

Fuji Heavy Industries Ltd. announced additional production cuts today. The maker of Subaru-brand cars will lower output by a further 10,000 vehicles in the year ending March, bringing total reductions to 70,000 worldwide. It will also shed 300 temporary jobs on top of 800 eliminations announced last month.

Japan’s exports plunged 26.7 percent in November, the sharpest drop since at least 1980, a report showed this week.

The Bank of Japan last week lowered its benchmark interest rate to 0.1 percent, increased purchases of government debt and announced plans to buy commercial paper for the first time.

Signs of Deflation

The inflation rate eased the most in a decade in November as prices of oil and other commodities plunged, indicating deflation may be returning to the world’s second-largest economy. Consumer prices excluding fresh food rose 1 percent from a year earlier, the slowest pace since April, the statistics bureau said today.

“Data clearly indicate the problem for Japan is deflation, not inflation,” said Yasunari Ueno, chief market economist at Mizuho Securities Co. in Tokyo.

Economic and Fiscal Policy Minister Kaoru Yosano said “the government, companies and politicians need to make an effort to keep the economy from falling apart next year.” Prime Minister Aso has unveiled two stimulus plans since becoming Japan’s leader in September; both await approval by parliament.

The measures “may help to ease the economy’s decline once they’re actually implemented,” Masamichi Adachi, a senior economist at JPMorgan Chase & Co. in Tokyo, said on Bloomberg Television. “But there’s still little hope that Japan’s economy will show any clear signs of a turnaround in 2009.”

Yen Pain

The yen’s 23 percent gain against the dollar this year is compounding exporters’ woes by eroding their profits. Japan’s currency surged to a 13-year high of 87.14 on Dec. 17.

Japanese carmakers have been hit by the recession in the U.S., where consumer credit is drying up and households are spending less. Toyota this week forecast its first operating loss in seven decades for the year ending March. Last month the automaker, the world’s second largest, said it would fire 3,000 temporary staff.

Temporary and part-time workers are the hardest hit by the downturn. Companies plan to fire 85,012 such staff by the end of the business year, more than double the 30,067 forecast last month, the Labor Ministry said today.

The ratio of jobs available to each applicant dropped for a 10th month in November to 0.76, extending the longest losing streak since 1998. Wages fell 1.9 percent, the most in four years, underscoring why consumer sentiment slumped to a record low.

Retail sales slid 0.9 percent from a year earlier, the biggest drop in 16 months, the Trade Ministry said today. Weaker personal spending is prompting retailers to reconsider investments.

LVMH Moet Hennessy Louis Vuitton SA last week scrapped plans to open a 12-story Tokyo store. Isetan Mitsukoshi Holdings Ltd., Japan’s largest department store, will delay renovating its two flagship outlets in Tokyo, broadcaster NHK reported last week.

 

Japanese stocks were up today.

Just thought I'd point that out - I like reading the news as much as the next guy, but ultimately I'm in the markets to make money.