Japan's industrial production rose for the first time in six months in November

Japan's industrial production rose for the first time in six months in November, indicating the recovery of the nation's exports regain traction.

Industrial production rose 1 percent from October, when fell 2 percent, the Commerce Ministry said today in Tokyo.Today's report makes the concern that more companies scale their production as the government's stimulus measures vanish. Exports stood yen near a 15-years to grow faster for the first time in nine months in November, supported by demand from China, Japanese government data last week. Honda Motor Co., the second largest manufacturer of Japan, is one of the companies to increase production to meet demand.

"It's nice to end the year with some good economic news," said Akiyoshi Takumori, chief economist at Sumitomo Mitsui Asset Management Co. in Tokyo. "Japan is still in a soft patch, but today's report signals that there will be better days ahead, driven by global recovery."

The yen traded at 82.71 per dollar at 10:10 am in Tokyo from 82.78 before the report's publication. The Nikkei 225 Stock Average fell 0.3 percent.

The production of advanced transportation equipment for the first time since March and the production of electronic components and devices won for the first time since May, the report showed today. Total production in October fell by the most since February 2009 as a program of government subsidies to buy fuel-efficient cars ended in September, prompting manufacturers to cut production.

"Awesome"

"The production was impressive and shows that the global recovery is firmly in place," said Takehiro Sato, chief economist for Morgan Stanley Japan Securities Co. in Tokyo MUFG. "The recovery in Japan is gradually improving after a pause."

Shipments of flat-panel TVs rose in November as buyers took advantage of incentive programs to purchase consumer electronics, today's report showed. The incentives were reduced in December.

A separate report today showed that retail sales rose 1.3 percent in November, beating economists' forecasts of a 0.4 per cent. Core consumer prices, excluding fresh food fell 0.5 percent and the unemployment rate held steady at 5.1 percent.

The manufacturers said they planned to increase production by 3.4 percent in December and 3.7 percent in January, a government survey in the report today showed results.

"An increase in estimated production is likely to reinforce the optimism of that production will pick up sooner than expected," said Yoshiki Shinke, economist at Dai-Ichi Life Research Institute in Tokyo.

Quarterly Drop

A figure out of December, in line with expectations will result in the production of slip about 1.6 percent this quarter, the second consecutive decline, the government said.

Komatsu Ltd., Asia's largest maker of construction equipment, said this month that the company is selling excavators in China is expected this quarter as the government aims to develop their inner regions. Honda said that China's production grew by 2.7 percent over the previous year, in November.

China's industrial production gained more than economists forecast in November last year. In the U.S., the economy expanded at a rate of 2.6 percent in the third quarter, marking a resumption of growth.

No double dipping

"We expect that production will suffer during the period from January to March, but do not expect a double dip," said Kyohei Morita, chief economist at Barclays Capital in Tokyo. If China maintains a robust and growing U.S. rebounds, "we believe that Japanese exports to maintain their positions in 2011, helping to sustain production."

Japan's government forecast on 22 December that economic growth will slow to 1.5 percent in the year starting April 1 from a projected 3.1 percent this year.

Cabinet of Prime Minister Naoto Kan, last week approved a record budget plan 92400000000000 yen for the next fiscal year that aims to stimulate private demand. Opposition parties, which control the Upper House of Parliament, will probably try to block passage of bills related to the budget, which complicates efforts to stimulate the economy Kan.

One risk for Japanese exporters is that China can continue to raise interest rates, causing a slowdown in its biggest overseas market, said Naoki Tsuchiyama, an economist at Mizuho Securities Co. in Tokyo. China raised interest rates on December 25 to counter inflation.

"Our main hypothesis is that the world economy is in a cyclical recovery next year," Tsuchiyama said. "However, downside risks remain strong as emerging countries could raise rates on an intermittent basis, which could weigh on Japan's exports.