TOKYO (AP) -- Production at Japan's vital manufacturers is sinking fast - and is projected to turn in its worst quarter ever - amid a plunge in global demand that is battering the core of the world's second-largest economy.
The government said Friday that industrial production in October fell a sharp 3.1% from the previous month and is expected to decline precipitously in the months ahead. The result follows a 1.1% gain in September and undershot market expectations for a 2.5% contraction.
"The world economy is a disaster," said Richard Jerram, chief economist at Macquarie Securities in Tokyo. "Exports are in the process of collapsing, and as a result industrial production is falling at unprecedented speed."
The results, along with labor and spending data released separately, underscore the increasingly grim outlook for Japan as it grapples with recession and the perils of depending so heavily on overseas sales of its cars and gadgets.
Exports in October marked their biggest decline in seven years, and companies expect conditions to only get worse.
Factory output will likely plummet 6.4% in November and fall 2.9% in December, according to the Ministry of Economy, Trade and Industry.
At that rate, industrial production is on track for its biggest quarterly fall since the government began compiling the data in 1955, said Masamichi Adachi, senior economist at JP Morgan Securities in Tokyo.
Adding to the pain is a stronger yen, forcing a growing number of exporters big and small to slash their future expectations for profit, sales and spending.
Electronics giant Panasonic Corp (PC). on Thursday became the latest victim of the global whiplash. It revised down its annual profit forecast by 90%, blaming a strong yen, sluggish sales and heavy discounting.
Earlier, Toyota Motor Corp. (TM) reduced its net profit full-year profit forecast to $5.5 billion - about a third of last year's earnings.
October's dismal production figures stem largely from heavy production cutbacks in among auto companies, electronics firms and machinery makers.
Production of transport equipment fell 5.8% during the month, while that of general machinery declined 3.5%. Electrical machinery output was down 1.7%, and electronic parts and device production slid 8.9%.
The government released other troubling data Friday.
Japan's unemployment rate stood at 3.7% in October, down from 4% the previous month.
The figure, however, is misleading, because it does not reflect the growing numbers of those choosing to leave the labor market entirely instead of looking for work, said Goldman Sachs economist Chiwoong Lee in a report.
"In the current situation we focus on the number of employed, which has declined for nine months in a row," Lee said. "This says the labor market is deteriorating."
After the data's release, Finance Minister Shoichi Nakagawa urged the Bank of Japan to take more steps to bolster Japan's labor market, without specifying any proposals.
"Looking ahead, Japan's economy is expected to face further deterioration, especially in income and employment," Nakagawa said, according to Kyodo news agency. "If the BOJ shares such a recognition, I would like the bank to carry out necessary steps."
Also, average monthly household spending in October fell a worse-than-expected 3.8% from a year earlier. The figure is an important gauge for individual spending, which accounts for more than half of Japan's gross domestic product.
Retail sales fell 0.6% from a year earlier in the second straight month of decline.
Prices continued to climb in October, though at a slower pace than earlier this year as oil prices eased. Japan's core consumer price index, excluding often volatile fresh food prices, rose 1.9%, climbing for the 13th straight month.
Lower prices should help stabilize domestic demand and offer some support to domestic companies' profits, Macquarie's Jerram said.
"The real disaster is on the export side of the economy," he said. "The domestic economy is not in great shape, but it's nothing like the catastrophe that you can see in export-facing industries."
6 months ago