Japan: Good News or Bad?

The presentation of the latest set of industrial production figures from Japan is interesting. The consensus is basically upbeat (and here). But read between the lines and things aren't so clear. And if you look at my post here, Japan certainly seems to have been slowing for the best part of a year now.

As Bloomberg have it:

Japan's industrial output rose to a record last month and inflation accelerated, giving the central bank room to raise interest rates by the end of the fiscal year in March.

An index of production climbed 1.9 percent from July, led by autos and electronics output, the trade ministry said in Tokyo today. Core consumer prices, which exclude fresh food, gained 0.3 percent from a year earlier, the statistics bureau said. Both results were in line with economists' expectations.

But

Still, prices excluding food and energy, which haven't risen in eight years, continued falling last month, signaling recent gains in core consumer prices have been largely the result of rising oil costs. Prices excluding food and energy fell 0.4 percent from a year earlier, the statistics bureau said.

``August was the month when energy pressure peaked. We have already seen gasoline prices weaken,'' said Hiromichi Shirakawa, chief economist at Credit Suisse in Tokyo, predicting that core prices may resume declining by the year's end. ``That's a very tough situation for the central bank -- it's only energy pushing up the consumer price index.''

Core prices in Tokyo, home to one in 10 Japanese and a harbinger of Japan's nationwide consumer prices, were unchanged in September from a year earlier. Tokyo prices excluding food and energy fell 0.3 percent this month.

and

Today's factory output report showed that production, shipments and inventories of electronic parts and devices all rose to a record in August. A slowdown in global growth may pose a risk for production in the coming months.

``A potential risk is inventory accumulation in electronics parts and devices in anticipation of Christmas sales,'' said Morgan Stanley's Sato. ``This may result in unplanned inventory accumulation due to lower foreign demand.''

Japanese manufacturers cut output in 2004 when global demand for electronics and chips slowed, causing the economy to contract in the fourth quarter and almost pushing it into recession.

Interesting isn't it, the way you can 'spin' data.