An aerial view shows a flooded Honda car factory in Ayutthaya province, in this photo taken by Kyodo on Oct. 30, 2011.
Japanese factory output rose more than expected in December as companies made up for disruptions caused by severe flooding in Thailand, but a sustained recovery is far from assured amid renewed yen rises and slowing global growth.
Industrial output rose 4 per cent in December, more than a median market forecast for a 3-per-cent gain and rebounding from a 2.7-per-cent drop in November, trade ministry data showed on Tuesday.
Manufacturers surveyed by the ministry expect the rebound to continue, projecting output to rise 2.5 per cent in January and 1.2 per cent in February. But those modest gains were not enough to prompt the ministry to upgrade its assessment on output from the current view that it was moving sideways.
"Exports aren't that strong so output growth will remain more or less flat for the time being. Output probably won't pick up until around summer, when exports to the United States and Asia may start to strengthen again," said Takeshi Minami, chief economist at Norinchukin Research Institute.
Japanese companies were battered by disruptions in output twice last year – once after the devastating earthquake in March and again after major flooding in Thailand in the summer.
In another sign companies are trying to restore production after the Thai floods disrupted supply chains, a separate survey showed Japanese manufacturing activity expanded in January at the fastest pace in five months.
Japan's economy will likely contract mildly in the fiscal year ending in March but is expected to rebound in the following year as reconstruction of the northeast devastated by last year's earthquake and tsunami makes headway.