Japan August factory output to rise but weak Asian economies weigh

TOKYO: Output at Japanese factories is expected to have risen in August, and domestic consumption measures also probably improved, but analysts say firms may keep a lid on production as China's economic slowdown begins to crimp global demand.

In a nod to growing stresses on Japan's economy, the government on Friday lowered its economic assessment and highlighted risks posed by China and an anticipated US rate hike in coming months.

A Reuters poll of 21 analysts forecast industrial production to have risen 1% in August from the previous month, when it fell 0.8%, but some analysts doubt the gains will be sustained.

"Many industries have lowered their production due to an inventory adjustment," said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute. "Factory output will likely stay weak ahead as economic slowdown in China has spread to Asean nations which weigh on Japan's exports."

Anxiety among global policymakers and investors of a China-led slowdown in world growth has rattled financial markets, with the US Federal Reserve last week citing China risks in holding off from raising interest rates for the first time since 2006.

Many Asian economies, including South Korea, Taiwan and Singapore, have been hit by crumbling exports as demand from China cools.

The trade ministry will release the factory output data on Sept 30.

The poll also forecast August retail sales up 1.1% from a year earlier, rising for a fifth straight month, while household spending was seen up 0.4% on-year in August, the first gain in three months.

Tsunoda, however, said that with wages growth still sluggish, consumer spending is not expected to show robust gains in the short term. That is a bad sign for the economy, which shrank an annualised 1.2% in the second quarter dragged down by weak capital spending. 

Analysts are forecasting a modest rebound in growth in the current quarter, but weak exports and domestic demand have raised the risk of another economic contraction.

On the labour market front, the jobs-to-applicants ratio is forecast to be at 1.22 in August, which would be the highest since January 1992 when the ratio was at 1.25. The unemployment rate was expected to be unchanged at 3.3%.

Retail sales data are due along with industrial production, while household spending and jobs related data are due on Oct 2. - Reuters