Japan's industrial production picked up pace in December from the month before, in a sign the world's third-largest economy may be stabilizing thanks to stronger global demand and government spending.
Increased output of large passenger cars and vehicle components and machinery for making semiconductors were the main factors helping to drive the improvement in manufacturing, the Ministry of Economy, Trade and Industry said Thursday. It said industrial output rose a seasonally adjusted 2.5 percent from November.
The government of Prime Minister Shinzo Abe is already claiming progress in breaking the deflationary slump that has weighed on Japan's growth for years. Share prices are approaching three-year highs and many companies have reported improved profits thanks to a weakening of the Japanese yen against other major currencies
Since Abe took office on Dec. 26, his administration has pushed ahead with a 20 trillion yen ($220 billion) stimulus package, a hefty proposed budget for the coming fiscal year and a commitment by the central bank to unlimited monetary easing to help spur growth.
All that spending is meant to break the cycle of falling prices that is thought to be hindering business investment and hobbling growth.
"Generating enough demand to create a sustained recovery has been an uphill battle for policymakers," Moody's said in a commentary Thursday citing barriers to growth such as Japan's shrinking workforce and high savings rate. "Together, these moves could kick-start a recovery, assuming that stronger growth in Asia helps revive Japan's exports as well," it said.
Challenged by opposition lawmakers to explain how Japan can afford to boost spending when its national debt is already twice the size of the economy, Abe insisted his plan would balance the national budget by 2020. He also defended his administration's reliance on public works projects.
"I intend to have a deep discussion of the plans and seek public understanding to ensure transparency," Abe said during the televised legislative exchange.
Higher tax revenues are expected to help offset some of the increased spending: Earlier this week the government raised its forecast for economic growth in the fiscal year that starts April 1 to 2.5 percent from 1.7 percent.
While higher government spending can boost demand in the short run, growth can only be sustained through corporate investment, job creation and rising purchasing power.
Figures released by the Ministry of Health, Labor and Welfare on Thursday, however, showed average monthly wages, including overtime and bonuses falling to 314,236 yen ($3,453), the lowest level since such data became available in 1990.
The ministry, which based the data on a survey of 33,000 companies, attributed the drop to the rising use of part-time or temporary workers, who accounted for nearly 29 percent of all workers in 2012.
December's increase in industrial output compared with a month-on-month drop of 1.4 percent in November. Most analysts had forecast an improvement of more than 4 percent in December.
METI said inventories fell 1.1 percent from the month before while shipments rose 4.4 percent.
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