Japan Hit by Its Own Economic Slowdown

Japan’s industrial production fell an unexpected 3.9% in January, the biggest decline in more than three years, the government said, providing the starkest evidence yet of a sharp economic slowdown spilling over from the United States and Asia. “It’s a very bleak number. It’s the first real sign we’ve got that the Japanese economy is slowing down very substantially,” said Garry Evans, a strategist with HSBC Securities. Economists polled by Reuters had expected on average a rise of 0.1% compared with December, adjusted for seasonal variations. Even the most pessimistic forecast was for a drop of 0.8%. Just as troubling was a 0.6% increase in inventories, after a 0.1% drop in December, suggesting that manufacturers will have to cut output further to work off stockpiles of unsold goods. The weakness heightened speculation that the Bank of Japan, whose policymaking board is meeting today, will be jolted into easing credit to sling a safety net under the economy. But Bank of Japan Governor Masaru Hayami told lawmakers that monetary policy was already loose enough. The central bank’s key short-term rate is just 0.25%. Early today the economic data sent the Nikkei-225 stock index plunging as low as 12,784.17, a level last seen in 1985.

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