Weak Industrial Production in Japan

123jump.com Staff
30 Jan, 2008
New York City

Stocks in Asia and Japan faltered after the worries related to weakening subprime credit markets in the U.S. resurfaced. IMF lowered the global economic growth forecast for 2008. December industrial production index rose, but at a lower rate then estimated. METI also added that production in January and February is likely to trend lower, sparking worries that expected recovery from the housing market slump may take longer than estimated.

[R]5:00AM New York, 7:00PM Tokyo – Japan forecasted manufacturing to fall 0.4% in January and 2.2% in February. Sumitomo Mitsui estimated 99 billion in subprime related losses. [/R]

Stocks in Japan reversed earlier gains in the morning session to close down after a government report showed December industrial production rose below market expectations.

In Tokyo trading Nikkei 225 fell from a 0.3% gain in the morning session to close down 0.99% or 133.83 to 13,345.03 while the broader Topix Index reversed a 0.8% gain to drop 0.7%to 1,320.11.

Of the Nikkei 225 stocks 61 gained, 151 declined, and 13 were unchanged.

In the first section of the Tokyo Stock Exchange 10.9 billion shares worth 1.2 trillion yen were traded and in the second section 1.1 billion shares worth 7.6 billion yen changed hands.

The Ministry of Economy Trade and Industry reported today in its indices of industrial production preliminary report for December that industrial production rose for the first time in two months to 1.4% in December from November and gained 0.7% from the previous year to a seasonally adjusted 111.9.

Economists had forecasted that production index rise of 2%.

Industries that contributed to a rise in production included electronic parts and devices, general machinery and plastic products. Production of large passenger cars, flat panel display equipment and lithium ion storage batteries also significantly impacted on the increase.

METI also reported that shipments increased in December for the first time in two months by 1.6% from the previous month and 3.12% from a year ago to a seasonally adjusted figure of 116.9 buoyed by transport equipment, general machinery and iron and steel in that order.

Inventories however declined 0.5% from a month earlier for the first time in five months and 0.7% from the previous year dragged down by transport equipment, information and communication electronics equipment and chemicals.

According to the survey of production forecast, manufacturing expected to fall 0.4% in January weighed down by transport equipment, fabricated metals and chemicals respectively.

In addition production is expected to drop in February by 2.2% due to falls in electronic parts and devices, electrical machinery and general machinery.

The IMF forecasted yesterday in the World Economic Outlook Update report that global growth is expected to decelerate to 4.1% this year from 4.9% in 2007, a 0.3% decline from the October forecast.

The U.S. economic growth projection was revised downwards from 2.2% in 2007 to 1.5% in 2008, while China is expected to slow from 11.4% in 2008 to 10% and Europe to 1.6%. Latin America will grow at a slow pace at 4.3% in 2008 from 5.4% in 2007.

Of the Nikkei 225 index shares Electrical Industries led advancers with a rise of 8.55% followed by gains in Chiyoda Corporation of 6.83%, in Hino Motors Limited of 6.46%, in Mitsui OSK Lines of 5.93%, and of Advantest Corporation of 5.63%.

Shipping lines rose as well. Kawasaki Kisen jumped 2.47% and Mitsui Engineering and Shipbuilding climbed 3.60%.

Consumer credit companies gained after Promise Company reported yesterday that third quarter net income rose to 13 billion yen from a 9.4 billion yen loss recorded a year ago in the same period. Credit Saison rose 2.64% and Mitsubishi UFJ Nicos soared 4.03%.

Sumco Corporation led declining Nikkei 225index shares with a drop of 7.82% followed by losses in Nisshin Seifun of 5.21%,in Hokuetsu Paper of 5.10%, in Toto Limited of 4.99%,and in Shin-Etsu Chemical of 4.79%.

Domestic related shares fell after METI reported that industrial production will decline in January and February.

Citigroup and Nikko Cordial announced in joint statement yesterday that Citigroup has completed the acquisition of Nikko through a share swap deal worth $4.8 billion at a rate of 0.602 Citigroup stock for each of the Japanese brokerage share. Also Douglas Peterson was announced as the new Chief Executive Officer and President.

The Nikkei news online reported today that Mizuho Securities Company will likely book a loss that is twice its November projections at 250 billion yen.

Sumitomo Mitsui Financial Group reported yesterday that the company’s profit fell from 319.4 billion yen in the nine months to December from 396.05 billion yen the same time a year earlier. The company recorded a 99 billion loss in subprime related investments.

However it maintained its forecast for the fiscal year profit ending March 2008 at 570 billion yen. The stock closed up 2.66%.

Daihatsu Motors, which is 51% owned by Toyota, reported in a trading update that the company’s net income rose 42% to 7.9 billion yen in the quarter ended December 31 from 5.58 billion a year ago and raised its full year profit forecast 3.7% to 1.7 trillion yen.