Japan's Industrial Power Sales Fall as Economy Slows

By Megumi Yamanaka and Michio Nakayama

Sept. 19 (Bloomberg) -- Japanese industries consumed less electricity for the first time in three years in August as slower export growth and high energy costs sapped demand.

Power sold to industrial users fell 0.1 percent last month compared with a year earlier to 25.7 billion kilowatts-hours, data released by the Federation of Power Companies showed today. That's the first decline since July 2005.

Manufacturers cut operating rates after the Japanese economy shrank at the fastest pace in seven years in the second quarter, partly because of a drop in exports. The central bank last month described growth in the world's second-largest economy as ``sluggish,'' language it introduced for the first time in 10 years.

``The economy is weakening as shown in other economic indicators,'' Shosuke Mori, president of Kansai Electric Power Co., Japan's second-biggest generator, told reporters today. ``Larger customers actually reduced their power consumption by a greater extent,'' compared with the 0.1 percent drop.

A U.S. economic slowdown, worsened by a spreading credit crisis spurred by the collapse of Lehman Brothers Holding Inc., is dimming Japan's growth prospects. Exports dropped 2.5 percent in the second quarter from a year earlier.

Toyota Motor Corp., the world's second-largest carmaker, led the biggest monthly drop in domestic auto sales in almost a decade last month, the Japan Automobile Dealers Association said. Toyota lowered its 2009 forecast for global sales growth.

The cost of energy in Japan has risen after power utilities increased prices earlier this year as crude oil soared. Oil prices in New York reached a record $147.27 a barrel on July 11.

Industrial Users

Makers of automobiles, semiconductors and liquid crystal display panels used 2.9 percent less electricity than a year earlier in August, while textile manufacturers reduced consumption by 9.5 percent.

Central regions, supplied by Chubu Electric Power Co., saw the biggest drop in industrial demand, followed by the Greater Tokyo region, supplied by Tokyo Electric Power Co.

Chubu Electric sold 3.3 percent less electricity to industrial customers that consume more than 500 kilowatt-hours, while Tokyo Electric posted a 1.1 percent decline. Automakers including Toyota are based in the area Chubu Electric serves.

``There are concerns and risks of an economic slowdown, judging from the decline in industrial power sales,'' Hirofumi Kawachi, an energy analyst at Mizuho Investors Securities Co., said by telephone. ``It's not a significant drop and we need to watch more to judge the trend.''

Electricity supplied by all of Japan's 10 regional utilities rose 3.9 percent in August, led by increased consumption from households and demand from some companies such as steel and non-ferrous metal mills, according to data from the Federation of Power Companies.

To contact the reporter on this story: Megumi Yamanaka in Tokyo at myamanaka@bloomberg.net.