Business / Economy

Japan lowers assessment as January industrial output falls 6.6%

Kyodo

The nation’s industrial production in January fell by a bigger-than-expected 6.6 percent from the previous month on weakness among carmakers, prompting the government to lower its basic assessment for the first time in over two years, industry ministry data showed Wednesday.

The seasonally adjusted index of factory and mine output dropped for the first time in four months to 99.5 against the base of 100 for 2010, following an upwardly revised 2.9 percent increase in December, the Ministry of Economy, Trade and Industry said in a preliminary report.

The index came in weaker than market forecasts of a roughly 4 percent decline. It was the biggest fall since a 16.5 percent drop in March 2011 amid supply disruptions following the Great East Japan Earthquake.

“Given the strong reading for December, we had expected a relatively sharp fall in January. But the drop was bigger than expected,” a ministry official told a news briefing. The result “suggests that the upward momentum that we saw in the final quarter of last year is gone.”

Carmakers and suppliers led the decline, with their production falling 14.1 due largely to weak exports to the United States, the ministry said.

Some machinery-makers also slowed production as massive snowfall disrupted supplies. Makers of general purpose, production and business oriented machinery slid 7.8 percent.

All 15 sectors in the survey reported declines.

The ministry downgraded its basic assessment of production for the first time since August 2015, saying output is “picking up slowly.” It previously said industrial output is “picking up.”

Looking ahead, manufacturers polled by the ministry said they expect production to climb 9 percent in February and drop 2.7 percent in March.

“The expected increase in the index for February would not be enough to cover the fall in January and the forecast for March is not so robust,” said the official, in explaining why the ministry downgraded the assessment.

But some experts say the underlying trend of production remains firm.

“It was a big drop but was nevertheless within the range of prior expectations. Production could rebound sharply in February,” said Takeshi Minami, chief economist at the Norinchukin Research Institute, who maintained his view that “the upward trend in production will continue this year.”

The index of industrial shipments fell 5.6 percent to 98.3 while that of inventories was down 0.6 percent to 108.8.

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