Japan Industrial Output March 2008

The Bank of Japan kept interest rates on hold as expected on today as rather gloomy industrial output, household spending and job figures pointed to weakening growth in the wake of the credit crisis. The weak data, along with a slump in U.S. consumer confidence, pushed up Japanese bond prices, amid worries that American economic woes were hitting the big exporters that are sustaining Japanese growth.



The central bank, which has its key interest rate already at a low 0.5 per cent, is expected to cut its growth outlook and raise its inflation forecast in a half-yearly economic report due out today. Japanese industrial output fell 3.1 per cent in March – the biggest monthly fall for at least five years and far below a market median forecast of a 0.8 per cent drop.

”This could raise concerns that the Japanese economy is slowing down sharply in the January-March quarter,” said Yasuhide Takahashi, economist at Nomura Securities. ”Output is also not expected to recover much in coming months after a sharp drop in March. We think the economy will remain sluggish until the third quarter of this year.”