Credit Herald

Japan’s industrial production rose and unemployment fell in December, driven by a rebound in exports that’s now threatened by an appreciating currency.

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.

Declines in consumer prices and the yen’s 8 percent climb in the past nine months are forcing policy makers to remain open to further stimulus even as companies from NEC Corp. to Canon Inc. report earnings improvements. The Bank of Japan highlighted concern the yen’s rise to a 14-year high would undermine business sentiment, minutes of their meetings 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, 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 advanced to 1.315 percent after earlier reaching 1.305 percent, the lowest since Jan. 4. The yen fell to 89.96 per dollar.

‘Severe’

“There are signs that the economy is picking up, but this is far from a self-sustained recovery,” Kan said at a gathering of regional Finance Ministry chiefs in Tokyo today. “Employment conditions are severe.”

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.

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.

Canon, based in Tokyo, this week forecast its biggest annual profit increase in a decade as the global recovery revives demand for cameras and office equipment. NEC, Japan’s largest maker of personal computers, posted a narrower loss in the third quarter after cutting costs.

“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.”

Stimulus Package

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.”

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.

Export Recovery

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.

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