Business / Economy

Government says factory production is 'pausing' after industrial output fell 3.7% in January

Kyodo

Japan’s industrial output fell 3.7 percent in January from December, a third straight monthly decline amid sluggish export demand, the industry ministry said Thursday, prompting the government to lower its basic assessment.

The month-on-month pace of decline is the largest in a year. Sagging exports to China amid a tariff war between Beijing and Washington is largely behind the “larger-than-expected” drop, a ministry official said, adding that demand from other Asian countries was also weak.

The Ministry of Economy, Trade and Industry downgraded its basic assessment, saying production is “pausing,” compared with the previous month’s view that industrial output was “picking up slowly.”

The seasonally adjusted index of production at factories and mines stood at 100.8 against the 2015 base of 100, the ministry said in a preliminary report. The result followed a 0.1 percent fall in December.

In January the index of industrial shipments fell 4.0 percent to 99.2, and that of inventories slipped 1.5 percent to 101.6.

Output of electronic parts and devices, including smartphones, dropped 8.4 percent from the previous month, partly dragged down by weakening demand from China.

Production by automakers and parts suppliers dropped 8.6 percent, affected by a temporary factory shutdown at Subaru Corp. following the discovery of a power-steering defect in certain models.

Looking forward, manufacturers polled by the ministry said they expected output to rise 5.0 percent in February and decline 1.6 percent in March.

The ministry official said “As companies are cautious about ramping up production, it is difficult to see production will rebound significantly” in the near future.

Some private-sector economists appeared more optimistic about the situation further down the road.

Takuji Aida, chief economist at Societe Generale Securities, said that despite January’s fall, industrial output will likely recover in the next quarter, beginning in April.

“Production will begin to rise in the April-June quarter as economic fundamentals of the U.S. economy have not deteriorated significantly, China will implement economic measures, and domestic demand in Japan remains strong,” Aida said.