Japan Factory Production Rose, Unemployment Fell in December

Jan. 29 (Bloomberg) -- Japan’s industrial production rose and unemployment rate fell in December, signaling a continued recovery, while central bankers considered the threat to the economy from exchange rates, reports showed today.

Factory output increased 2.2 percent from the previous month, less than economists had projected, Trade Ministry figures showed today in Tokyo. The unemployment rate dropped to 5.1 percent from 5.2 percent, according to a separate release.

While the gains in production and jobs may reduce the danger of a return to recession, declines in consumer prices and an appreciating yen are forcing policy makers to remain open to further stimulus. Bank of Japan officials highlighted concern that the yen’s rise to a 14-year high would undermine business sentiment, minutes of their meetings last month showed today.

“This confirms that the worst is over,” said Masamichi Adachi, senior economist at JPMorgan Chase & Co. in Tokyo. “But these are very, very small improvements, and the jobs recovery ahead is going to be extremely slow, too.”

Bond futures rose, and headed for a three-week advance, as the evidence of continued deflation underpinned demand for the relative safety of government debt. Yields on benchmark 10-year bonds fell to 1.305 percent, matching the lowest level since Jan. 4, at Japan Bond Trading Co. The yen rose 0.3 percent to 89.66 per dollar.

A separate government report today showed household spending rose 2.1 percent in December from a year before, more than forecast and capping a fifth straight advance. The figures contrasted with data earlier this week showing retail sales tumbled 0.3 percent from a year ago.

More Work

The economy added 130,000 jobs in December, the biggest increase in four months. People found more work in medical, welfare and education sectors, while there were fewer jobs and manufacturing and retail industries, according to unadjusted figures in the report.

“Unemployment has improved a little bit but I don’t think we can be optimistic at all because the number is still more than 5 percent,” Prime Minister Yukio Hatoyama told reporters today in Tokyo. “The situation remains where many people want to work but cannot find a job.”

Japan’s Diet yesterday approved a 7.2 trillion yen ($80 billion) economic package aimed at bolstering the recovery from the nation’s worst postwar recession.

“At least the worst is over,” said Yoshiki Shinke, senior economist at Dai-Ichi Life Research Institute in Tokyo. “But I’m concerned unemployment is going to stay stuck at this high level for some time.”

Cutting Staff

Some companies are still slashing jobs to rein in costs. Promise Co., Japan’s second-largest consumer lender, said yesterday it will cut 1,600 staff, or a third of its workforce, by the end of March 2011. The Tokyo-based company’s net income slumped 23 percent in the six months ended Sept. 30. Japan Airlines Corp., which filed for bankruptcy this month, will slash about 15,700 jobs by the end of March 2013.

The job-to-applicant ratio rose for a fourth month to 0.46, meaning there are 46 positions for every 100 candidates, the Labor Ministry said today. The same report showed there were 87 newly advertised jobs in December for every 100 people who started looking for work that month, the most since January. Economists regard the gauge as a leading indicator of employment.

Exports rose for the first time in 15 months in December, fueling production gains and may also be encouraging companies to increase overtime or hiring. Toyota Motor Corp. and Sumitomo Pipe & Tube Co. are among companies increasing production to meet growing demand in China.

Toyota, Nissan Motor Co. and Honda Motor Co. increased global production in December as automobile demand surged in China and U.S. sales recovered. Output at Toyota rose 33 percent from a year earlier, while Honda increased production 3.4 percent and Nissan’s surged 54 percent.

The manufacturers plan to increase production 1.3 percent this month and 0.3 percent in February, the government said today.