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. Last Updated: 07/27/2016

Japan's Industrial Output Surges Despite High Yen

TOKYO -- Japan produced more evidence of an economic upturn Monday as industrial output showed a sharp gain in November, shrugging off the strong yen.

Industrial production rose 3.8 percent in November from the previous month on a seasonally adjusted basis, according to preliminary data released by the Ministry of International Trade and Industry, or MITI.

Economists said the data reinforced views that industrial production remains on the rise, primarily led by strong demand for personal computers and related devices.

The Trade Ministry stuck to the same overall assessment of industrial output as in the previous month, saying: "Prospects for a continued recovery in final demand remain uncertain, but production and shipments are improving."

On the consumption side, MITI data showed no clear sign of improvement in consumer spending, which accounts for 60 percent of the Japanese economy. The preliminary report said retail sales fell 2.8 percent in November from a year earlier while sales at large stores fell 7.2 percent on a same-store basis, the 19th consecutive month of year-on-year decline.

Japan's Cabinet last Friday approved the nation's biggest-ever budget for the year starting next April, aimed at achieving 1 percent growth in the gross domestic product through a recovery in corporate investment and consumer spending.

A MITI official said the yen's recent strength had not hurt Japan's industrial production, adding that any negative impact has been offset by a rise in output in volume terms due to growing exports to Asia and elsewhere.

Looking forward, MITI expected output to fall 1.7 percent in December but to rise 3.1 percent in January.

Economists said the yen's rise against the dollar since summer has not taken a major toll on production and the overall economy as major firms have reduced operational costs by restructuring, enabling them to responded more calmly to the yen's rise than in the past.

But Nobuyuki Saji, chief economist at IBJ Securities, warned that lagging effects of the yen's rise on production may be visible in six months, particularly the impact on smaller firms. Reflecting such concern, Japanese Finance Ministry officials reiterated Monday concerns about an "excessive rise" in the yen's value against the dollar and the euro.

In other economic news, the Construction Ministry said orders received by 50 major Japanese construction companies in November rose 2.4 percent from a year earlier in private sectors, while orders from public sectors shrank 14.9 percent.