Japanese Industrial Output Drops in February

Factory output in Japan declined by 2.3% in February, official figures released on Monday show.

The fall could add to concerns about a slowdown in the world’s third-largest economy.

February’s figure was the first decrease in three months, and it surprised many analysts who were expecting a boost ahead of a planned tax increase.

Sales tax will increase in Japan from 5% to 8% on 1 April.

The move is intended to combat Japan’s growing debt load, and it is part of Prime Minister Shinzo Abe’s plan to boost prices.

Mr Abe has stated that he would like to see prices increase by 2% – which would be a sign that Japan has won its battle against deflation, or declining prices.

Weak data
However, many analysts had been expecting to see a boost in spending and output ahead of the tax increase.

But the 2.3% month-on-month drop in factory output came as a surprise, particularly after the 3.8% expansion in January.

A separate private survey of executives at 400 companies in Japan from Markit/JMMA also reported that factory output in the country had slowed to its lowest level since September.

The weak factory data follows a raft of other disappointing figures, including weaker than expected household spending and declining retail sales.

This has added fuel to speculation among analysts that the Bank of Japan might act this spring to further boost the Japanese economy.

via BBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza