.gif)
Japan's factory output last month rose slightly but short of market expectations, data showed Monday as the government announced stimulus spending to boost a recovery threatened by the strong yen.
Industrial output in the world's second largest economy edged up 0.5 percent from September, an eighth straight monthly gain but well below an average market forecast of a 2.5 percent rise, data from the industry ministry showed.
Compared with a year earlier, industrial output was down 15.1 percent.
Japan, which has this year been digging itself out of its worst post-war recession, faces the threat of the yen trading at a 14-year high against the dollar, which hurts the profits of exporters such as Toyota and Sony.
Prime Minister Yukio Hatoyama at the weekend ordered his cabinet to work out measures to cope with the surging yen and its effects on the stock market in a supplementary stimulus package expected in coming months.
Chief government spokesman Hirofumi Hirano said Monday Tokyo planned an extra stimulus of at least 2.7 trillion yen (31 billion dollars) this fiscal year to March 2010, including measures to tackle the surging yen.
Deputy Prime Minister Naoto Kan said the supplementary budget would include funds frozen from a package of the previous conservative government, which lost power in August elections, plus new money.
The industrial production data for October -- smaller than a 2.1 percent rise in September -- was the first to be below market forecasts since March, said Naoki Murakami, chief economist at Monex Securities.
"The momentum of the recovery in corporate production is low," he said.
One reason, he wrote in a report, was that "companies are keeping their inventory levels low as they are cautious on how demand will fare in future," with electronic parts makers unsure about the strength of Christmas sales.
The official data showed shipments rose 1.3 percent from September but inventory stockpiles fell 1.5 percent on month.
Industrial production is expected to rise 3.3 percent month-on-month in November and by a further 1.0 percent in December, according to the manufacturers' own forecasts, the ministry said.
Resona Research Institute economist Hiroyuki Araki said the latest data "confirmed production is on a recovery track as exports are picking up thanks largely to demand from the rest of Asia."
"But the business environment, most significantly currency rates, has been changing greatly. Companies are becoming very cautious," he said.
If prolonged, the strong yen could impact companies' planning on where to locate their production bases in the world, he argued.
The yen was trading at 86.63 to the dollar in Tokyo early afternoon trade, unchanged from New York levels late Friday but sharply up from the 91 range a month earlier.
