Japanese industrial output and consumer spending have fallen heavily as fears grow that the country is heading for a deep and prolonged recession.
Industrial production fell by 3.1% in October compared with the previous month, much faster than expected.
Year-on-year consumer spending fell by 3.8% in October, also much faster than analysts had expected.
The figures were described as “horrendous” by Richard Jerram, an economist at Macquarie Securities.
“Production is falling much faster than we expected. Companies are adjusting their production very quickly,” said Takumi Tsunoda, senior economist at Shinkin Central Bank Research.
Carmakers are the worst hit, but other sectors are starting to suffer, particularly steelmakers, he added.
Companies are having to adjust production to reflect falls in demand for their products.
Record falls
Analysts are now forecasting a drop in industrial production of 8.6% for the fourth quarter, which would constitute the biggest quarterly fall on record.
“Japan’s industrial activity is set to worsen in the near-term, perhaps by an unprecedented degree,” said Glenn Maguire, Societe Generale’s chief Asia economist.
Earlier figures showed that Japanese exports fell by 7.7% in October as the yen climbed ever stronger against the dollar.
The Japanese economy is heavily dependent on exports to other industrial countries, who have all been hit by the global recession.
And the economy cannot rely on domestic demand to take up the slack.
Consumer spending fell 3.8% in October compared with the same month last year, as Japanese households tightened their belts in preparation for the tough times ahead.
“Japan is beginning to be substantially affected by the global economic recession,” said Kaoru Yosano, economic and fiscal policy minister.
Not even an unexpected fall in the rate of unemployment could brighten the mood, as the fall was widely attributed to a shrinking labour force rather than an increase in employment.
Tags: Carmakers, Central Bank Reasearch, Consumer spending, domestic demand, economic recession, fiscal policy, industrial output, Japanese economy, Japanese exports, Japanese households, Japanese production, prolonged recession, steelmakers
