Asia Economy

More Evidence of Japan Pickup—Industrial Output Rises

Akio Kon | Bloomberg | Getty Images

Japan's industrial output rose for a second straight month in January, offering some evidence that the export-reliant economy may be emerging from a mild recession due to a pick-up in global demand and the weaker yen.

The data covers the first full month in office for Prime Minister Shinzo Abe, who was elected in December and has vowed to revive the world's third-largest economy with his "Abenomics" policy mix of monetary and fiscal stimulus.

(Read More: Sharp Yen Rebound a Challenge to 'Abenomics')

The 1.0 percent increase in production from December compared with economists' median forecast for a 1.5 percent rise and followed a 2.4 percent gain in the previous month, which was the biggest gain since 2011, the trade ministry data showed.

Manufacturers surveyed by the Ministry of Economy, Trade and Industry expect output to rise 5.3 percent in February and 0.3 percent in March.

That was in line with analysts' views that the economy, which has contracted for the past three quarters, will grow moderately this year on the back of a global economic recovery and the government's expansionary policies.

"Overseas demand has bottomed out and for the next six months production is likely to increase," said Yasuo Yamamoto, senior economist at Mizuho Research Institute.

"I think Japan's recession is over. There are worries about yen gains, so there is a need to reduce volatility in the market. The government is cutting back on verbal intervention, but the Bank of Japan's easing stance means the yen should remain lower."

(Read More: This Time Around, Abe May Prove He's Got It Right)

The trade ministry raised its assessment of industrial output, saying output has stopped falling and some areas are picking up.

Separate data on Thursday showed manufacturing activity in February contracted at the slowest pace since June, with the Markit/JMMA Japan Manufacturing Purchasing Managers Index (PMI) up to a seasonally adjusted 48.5 from 47.7 in January.

The index was below the 50 threshold that separates contraction from expansion, but the pace of contraction eased for a second straight month.

In January the Bank of Japan, under pressure from Abe to end years of deflation, doubled its inflation target to 2 percent and made an open-ended pledge to buy assets from next year.

The central bank kept monetary policy steady at its policy review this month. But market players expect the BOJ will accelerate monetary policy easing after Governor Masaaki Shirakawa steps down on March 19.

Abe is expected to nominate Asian Development Bank President Haruhiko Kuroda, an ardent advocate of aggressive policy easing, as the next BOJ chief to boost his campaign to beat deflation.

Japan's parliament enacted on Tuesday a 13.1 trillion yen ($143 billion) extra budget to finance the biggest stimulus spending since the global financial crisis, as Prime Minister Shinzo Abe tries to shore up the economy.