Japan output slumps 1.7pc to post-quake low

Japan's industrial output tumbled more than forecast to the lowest level since the aftermath of the record 2011 earthquake, bolstering the case for Prime Minister Shinzo Abe to unleash large-scale stimulus.

The 1.7 per cent drop in November from October exceeded forecasts, a government report showed yesterday in Tokyo. The nation also remained mired in deflation, with consumer prices excluding fresh food dropping 0.1 per cent from a year before, compared with a central bank goal of 1 per cent and Abe's desired target of 2 per cent.

With neighbour South Korea reporting a jump in production almost double the highest estimate among economists surveyed, Japan's data may strengthen the new Abe administration's determination to drive down the yen and force the Bank of Japan to add monetary stimulus.

Abe has told ministries to compile emergency spending proposals by January 7.

"Weakness in exports is the major drag on Japan's economy," said Yoshimasa Maruyama, chief economist at Itochu in Tokyo. "Given the weak state of the economy, Abe's government may need a large-scale stimulus programme to boost growth."

Maruyama sees five trillion yen (HK$448 billion) to 10 trillion yen of initial support measures and says that it is "almost a done deal", that the Bank of Japan will move to a more aggressive inflation target in January.