Report Underlines Risk of Japan Recession
By REUTERS
TOKYO, Wednesday, Feb. 28 - Japan's industrial production slumped a surprising 3.9 percent in January, the government said today, providing more evidence of a sharp economic slowdown and helping to send the Tokyo stock market to a 15-year low.
The Nikkei 225 average fell 2.11 percent in the early afternoon to 12,784.17, its lowest since Dec. 10, 1985, as investors shortened the odds of a return to recession after a decade of slow, on-and-off growth.
"It's a very bleak number," said Garry Evans, a strategist with HSBC Securities. "The risk of Japan going back into outright recession is a very real risk."
Just as troubling as the drop in industrial production was a 0.6 percent increase in inventories, following a 0.1 percent drop in December, suggesting that manufacturers will have to cut output further to work off stockpiles of unsold goods.
The weakness fanned speculation that the Bank of Japan, whose policy-making board was meeting today, might be jolted to emulate the United States Federal Reserve and try to help the economy by easing credit further.
Even before today's report, Japan was flirting with recession, commonly defined as two consecutive quarters of shrinking production.
Gross domestic product dropped 0.6 percent in the July-September quarter, and figures for the final three months of 2000, due next month, are expected to show modest growth at best.