The Ministry of Economy, Trade and Industry said in data compiled before the devastating March 11th 2011 earthquake and tsunami that Japanese industrial production posted a surprise gain in February 2011, rising a seasonally adjusted 0.4% from the previous month as production of machinery increased.
The result compared with the median forecast of a 0.2% drop in a poll of economists by Dow Jones and the Nikkei. The result marked the fourth straight month of gain following a 1.3% rise in January 2011.
The data components showed production of automobiles rose 3.4% from a month earlier, due largely to strong demand from the US, while general machinery production rose 2.4%, and iron and steel production was up 3.5%, the latter due to demand from China.
The data also showed that manufacturers polled by the ministry expect orders to rise 1.4% in March 2011, and drop 1.3% in April 2011. However, the data and forecasts were compiled before a 9 magnitude earthquake and subsequent tsunami devastated northern Japan and severely disrupted the supply chain for a number of key industries.
A METI official briefing reporters said the government would need to monitor the effect of the disaster carefully. It added that "We are still of the view that production is recovering, but going forward, we must monitor any quake elated effects closely."
Mr Takuji Aida senior economist at UBS Securities Japan said that damage to factories from the quake along with subsequent power outages which are expected to continue for months mean industrial output will likely fall 3% to 4% on month in March, and 1% to 2% in April, which would smother overall economic growth ahead.
He added that "The auto sector is the biggest concern, given its centrality to manufacturing and exports, and the severity of some of the production cuts there."
To counter the expected negative impact of the quake and ongoing nuclear power plant emergency in the northern area of Fukushima, the government has started work on a supplementary budget for the fiscal year that begins April 1st 2011.
Mr Yoshihiko Noda finance minister of Japan has pledged to submit the first of those budgets to parliament within the next month.
According to the Kyodo news agency, the government is considering making the first extra budget worth JPY 2 trillion to JPY 3 trillion. Economists speculate that total additional government spending for rebuilding efforts could reach Y10 trillion over the coming years.
(Sourced from Kyodo news agency)
