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Home > Blogs > Anthony Harrington > Japan—More moss or actual green shoots?

Japan—More moss or actual green shoots?

Finance Blogger: Anthony Harrington Anthony Harrington

The Japanese economy took a real thumping through the recession. If you are the world’s second-largest export engine and global demand for imports contracts to near zero you are going to take some serious pain. That is a given. However, despite the fact that the Japanese are bone weary of green shoots stories, having had more than their fill of such portents over the last two decades, it seems that the colour green is manifesting itself in tender sproutings all over the place.

The Nomura/JMMA Purchasing Managers Index (PMI) rose yet again in September to 54.5, following a 3-year high for August’s figure of 53.6. (Any figure over 50 shows an expansion, below 50 equates to expectations of a contraction in the economy). This means that Japanese manufacturing, at least in the eyes and opinions of the country’s purchasing managers (and if they don’t know, who does?), expanded for the third consecutive month in August.

The Japanese PMI is compiled by Markit Economics, which runs PMI surveys in 26 countries. According to Markit, production growth in the Japanese manufacturing sector “accelerated to its most marked for three-and-a-half years.”  However, just to prove that there is no good without a dash of bad in these difficult times, Markit’s survey also found that while Japanese industry is getting the assembly lines rolling again, the sector is still shedding jobs faster than any other sector of the Japanese economy.

For those who like to follow differentiated “rate of descent slowing” type stories, in the hope that these indicators are valid “green shoots” signals, the Nomura/Markit PMI had another bit of good news. The rate of contraction in the Japanese service sector, which had been shrinking fast enough to alarm even the more stoically minded commentators, has eased yet again. That is not quite the same thing as saying, “hey, it’s started to grow,” but it is the next best thing…

On the back of seeing Japanese factory output going up for the sixth month in a row, at the end of September the giant Japanese car maker Toyota announced plans to double its intake of temporary workers for October, taking on 1,600 new staff. Toyota’s optimism is being echoed across the Japanese automobile market, with other marques also increasing output levels.  The industry could certainly use some good news. At the end of October, Mazda, Japan’s fourth-largest car manufacturer announced its results, which showed a net loss for the first six months of 2009 of some ¥21 billion. This compares to a profit of ¥29.5 billion for the same period in 2009. Sales were down 18%. Fellow auto maker Mitsubishi reported an even more painful net loss of ¥36.4 billion for the first half of 2009, as against a profit of ¥12.77 billion for the first half of 2008.

So if there is an upward movement, and it seems there is, then it is off a very depressed base.

For more on manufacturing see the following features in QFINANCE:

Tags: exports , Japan , manufacturing , purchasing , recession
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