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BOJ says factory output likely hit soft patch in April-June

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The Bank of Japan said it expects factory output to fall for the first time in three quarters in April-June on weak Asian demand, underscoring the fragile nature of the economic recovery.

[TOKYO] The Bank of Japan said it expects factory output to fall for the first time in three quarters in April-June on weak Asian demand, underscoring the fragile nature of the economic recovery.

Industrial production rose 1.5 per cent in January-March from the previous quarter, helping the world's third largest economy expand much faster than expected.

But the central bank offered a cautious view on the outlook for output, saying it may have briefly hit a soft patch as automakers see domestic inventories build up and steelmakers feel the pinch from sluggish Asian demand. "Industrial production will increase moderately reflecting domestic and overseas demand, albeit with some fluctuations," the BOJ said in a monthly economic report released on Monday.

The central bank also warned there was "high uncertainty" on its forecast that output will rebound in the third quarter.

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Japan has emerged from last year's recession as companies start to increase capital expenditure and consumer spending recovers from the pain of last year's sales tax hike.

Supermarket sales rose 5.7 per cent in the year to May to mark the second straight month of increase, data showed on Monday, signalling the mood of consumers was brightening.

But soft exports are emerging as a headache for the BOJ, weighing on output on casting doubt on the bank's forecast that solid overseas demand will help the economy gain momentum later this year.

The BOJ issues a summary of its economic assessment on the day of its monetary policy decision, and releases a more thorough report on economic components the following market day.

REUTERS

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