Japan's economic prospects improve

Japan's industrial output rose for the ninth consecutive month in November, the longest period of gains in more than 12 years, on demand from the US and Asia as also domestic subsidies.

The figures serve to reinforce the moderate economic recovery the Bank of Japan forecast, though persistent deflation could mean the government would keep up pressure on the central bank to further relax monetary policy.

Manufacturers, however, expect output to continue to rise in December and January, which would likely ease the government's concerns of the economy sliding into another recession next year. Some economists see this as early signs of recovery and expects it to continue. The question whether sales would grow in the new financial year remains.

The ministry of economy, trade and industry said on Monday that industrial output rose 2.6 per cent in November against the 0.5 per cent increase in October. These gains mostly came from the manufacture of cars and car parts with support from the Japanese government for energy-efficient production.

Manufacturers expect output to continue rising in January as well, which will likely ease the government's fears that the economy will slip into another recession next year.

The latest data showed increasing production by Japanese automobile and home electrical appliances firms gaining from government stimulus and strong exports within Asia.

Economists also doubt whether the rapid pace of gains in industrial production would be sustainable although the Democratic Party-led government in office is determined to keep the economy from slipping back into recession with an election for parliament's upper house due in mid-2010.

While the Japanese economy pulled out of recession in the second quarter of 2009, falling salaries are still stocking fears of a deflation.