Japan's industrial output rebounds as carmakers recover

Honda factory in Japan
Image caption Japanese carmakers have had to endure a tough 12 months due to natural disasters

Japan's industrial output rose more than expected in December as manufacturers recovered from the aftermath of the floods in Thailand.

Factory output rose 4% from the previous month the Ministry of Economy, Trade and Industry said, compared with a 2.7% decline in November.

The rebound was led by a recovery in car and electronics manufacturing.

Floods in Thailand last year disrupted supply chains of key components hurting production at some Japanese factories.

"Automakers and electronic equipment makers increased output as supply chains have recovered from floods in Thailand," said Norio Miyagawa of Mizuho Securities Research & Consulting Company.

"Electronic equipment makers have also reduced inventories, which is a positive sign."

However, Japan's manufacturing has yet to see full recovery. Compared to a year earlier, industrial output fell 4.1%.

Uncertain outlook

Despite the rebound, the outlook for Japanese manufacturers continues to remain uncertain, not least due to the global economic issues.

The eurozone debt crisis has impacted consumer sentiment in the region, hurting demand for Japanese goods.

At the same time, the recovery in the US economy continues to remain weak, affecting Japanese shipments.

Analysts said given the issues in the two of Japan's biggest markets, factory output is likely to remain stagnant.

"Exports aren't that strong so output growth will remain more or less flat for the time being," said Takeshi Minami of Norinchukin Research Institute.

According to a survey done by the ministry, manufacturers expect output to grow by 2.5% in January and 1.2% in February.

However, analysts said it will be some time before Japan's industrial production sees a full recovery.

"Output probably won't pick up until around summer, when exports to the United States and Asia may start to strengthen again," said Mr Minami.

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