Japan's industrial output grew for the fifth month in July as global stimulus spending boosted exports but analysts warned demand could soon fade and once again put pressure on the world's second biggest economy.
A survey of purchasing managers showed that the manufacturing industry was at its most active in nearly three years this month, although growth in new export orders slowed.
"Japan is picking up from a very low level and we don't want to make the mistake of thinking it is back on a fast track to growth," said Sebastien Barbe, an economist at Calyon in Hong Kong.
"Exports across Asia are still quite weak and we need to see the US economy in particular accelerate."
Factory output rose 1.9 per cent in July, beating the median forecast in a Reuters poll of 1.4 per cent, but slowing from a 2.3 per cent gain in June.
Manufacturers surveyed by the Ministry of Economy, Trade and Industry said they expected output to rise 2.4 per cent in August and 3.2 per cent in September.
Analysts remained cautious, however, noting that the rise in July reflected demand for cars as a result of stimulus spending by governments and that the effect would peter out next year.
"Current output growth is led by one-off factors and the capacity utilisation rate remains low, so a slowdown is anticipated towards the end of this year and early next year and the downtrend may be exacerbated by weak domestic demand in the face of the worsening job situation." said Hiroshi Shiraishi, economist at BNP Paribas.
Japanese wage earners' total cash earnings dropped 4.8 per cent in July from a year earlier, after falling a record 7 per cent in June, government data showed.
With the jobless rate jumping to a post-war high of 5.7 per cent in July and companies under pressure to cut costs to stay competitive, downward pressure on wages is expected to continue. This could add to the deflationary pressures in the economy.
The Nomura/JMMA Japan Manufacturing Purchasing Managers Index (PMI) rose to a seasonally adjusted 53.6 in August, the highest since November 2006, from 50.4 in July.
Reuters