• Bloomberg, reuters

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Japan’s industrial production dropped again in May even as a nationwide state of emergency was lifted, showing the severity of the pandemic’s impact on the export-reliant manufacturing sector.

Factory output fell 8.4 percent from April, the economy ministry reported Tuesday. Production slid from the prior month for a fourth time in a row, something that hasn’t happened since 2012. The result was worse than any of the forecasts from 28 analysts. The median projection was for a 5.9 percent decline.

Tuesday’s industrial production report suggests that even as the lifting of restrictions allows Japan’s factories to restart, weak global demand means there’s less work to do.

Recent rises in infection rates in the U.S., Japan’s biggest overseas market last year, makes a speedy recovery unlikely. Domestic spending could also stay depressed amid the fear of a second wave of virus cases and more potential job losses.

Still, Tuesday’s raft of data contained some signs the economy may have bottomed: the production report showed manufacturers plan to ramp up output by 5.7 percent this month and 9.2 percent in July.

Economist Yoshiki Shinke at Dai-Ichi Life Research Institute said the production data signaled a third quarter rebound in economic growth, but a return to pre-virus levels would take a long time. "Japan’s economy has probably passed the bottom and an initial pickup could be faster than expected, but there is a long road ahead to get back to normal,” he said.

The government, however, left its assessment of industrial production unchanged, saying it was "lowering sharply," the bleakest official view since late 2008.

Output of cars, production machinery, steel and other broad industries were hit hard by slumping demand at home and abroad due to the pandemic. All industries surveyed posted a fall in output.

Global production at Japan's major automakers, including Toyota Motor Corp and Nissan Motor Co, slumped 62 percent in May from a year ago, following a 55 percent fall in April, as car demand plunged globally amid lockdowns to stop the virus from spreading.

The nation's economy shrank an annualized 2.2 percent in January-March, slipping into recession for the first time in over four years, and analysts expect the health crisis to have driven a deeper slump in the current quarter.

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