June 12, 2009 / 6:17 AM / 11 years ago

UPDATE 2-Japan capacity utilisation jumps from low

(For more stories on the Japanese economy, click [ID:nECONJP])

* Capacity utilisation rises at record pace but still low

* April industrial output revised up to 5.9 percent gain

* Consumer confidence up in May for fifth straight month

By Tetsushi Kajimoto

TOKYO, June 12 (Reuters) - Capacity utilisation at Japanese factories hit hard by the financial crisis bounced back at a record pace in April, further improving from an all-time low in February as autos and technology firms reversed some output cuts.

Restoring production to somewhere near full capacity is needed before Japan’s big manufacturers resume stalled capital spending, but with many factories still partly idle, that is unlikely any time soon.

“With still about 30 percent of excess capacity, companies won’t think about boosting capital spending just yet,” said Naoki Iizuka, a senior economist at Mizuho Securities.

Machinery orders, a key component of capex spending for Japan’s big manufacturing sector, unexpectedly fell in April, suggesting companies are not yet confident that a bounce in industrial output and exports will be sustained enough to resume capital investment. [ID:nT134095]

“If industrial output continues to improve during the summer, capacity utilisation may exceed 80 percent. That’s when companies may feel more like increasing spending.”

The Japanese data added to hopes the world economy is emerging from the deepest recession in decades as it followed figures that China factory output rose more than forecast in May and U.S. retail sales was up for the first time in three months. [ID:nPEK330475] [ID:nN11493029]

Japan's Nikkei stock average .N225 climbed to close above 10,000 on Friday for the first time in eight months as upbeat data from Japan and China fed hopes for global economic recovery, leading to broad-based buying. [.T]

The Japanese capacity utilisation index rose 10.2 percent in April to 67.2, the Ministry of Economy, Trade and Industry said, up for the second straight month after hitting a record low in February. [JPIP4=ECI] For graphic of capacity utilisation and industrial output click: here

The rise in output was led in part by demand for electronics from China and for automobiles from the West, a ministry official said, adding that factories also cut production capacity at a record rate by cutting operations.

While the rise reflects efforts by companies to restock after a heavy rundown in inventories, output is running around 28 percent below levels seen before U.S. investment bank Lehman Brothers went broke in September, jolting financial markets and sending exports into a nosedive.

Industrial output rose 5.9 percent in April, the biggest monthly gain since 1953, Friday's revised data showed, in another sign the economy may be picking up from its deepest recession in decades. The preliminary reading was for a 5.2 percent rise. [JPIP4=ECI] For a graphic on Japan, U.S. and euro-zone output click: here

Japan is mired in its worst recession since World War Two but exports and output have shown some signs of recovery, adding to hopes the worldwide slump may be nearing a bottom.

In a bright sign, consumer confidence improved in May for a fifth straight month. But the government sentiment index was still deep in pessimism, after hitting a record low in December. [JPCONI=ECI]

Analysts expect a recovery in the world’s No.2 economy to be fragile as many companies have slashed jobs amid weak domestic demand.

Japan’s economy is expected to grow 0.5 percent in the second quarter after shrinking a record 3.8 percent in January-March, a Reuters poll showed. [ID:nT256956] [ID:nT320607] [ID:nT134095] (Additional reporting by Hideyuki Sano; Editing by Rodney Joyce)

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