Japan's industrial output fell 10% to 7-year low in 2020 amid pandemic

Industrial output dropped 10.1% in 2020 from a year earlier, to the lowest level in at least seven years, as the novel coronavirus pandemic hit the nation’s transport and machinery sectors, government data showed Friday.

The seasonally adjusted index of output at factories and mines stood at 90.9 against the 2015 base of 100, for the lowest reading since comparable data became available in January 2013, the Economy, Trade and Industry Ministry wrote in a preliminary report.

Production fell sharply in the spring of 2020 after the expansion of the COVID-19 pandemic disrupted supply chains, constrained socioeconomic activities and reduced consumer demand.

After the output index slumped to as low as 78.7 in May, the auto sector showed a strong recovery from June and contributed to overall gains in the index, but its upward momentum eased in November and December, a ministry official said.

In December, the index fell 1.6% to 93.2, dragged down by weak output for business-oriented machinery, which registered a fall of 11.7%. Production in the auto sector dropped 3.0%.

The December index followed a downwardly revised 0.5% decrease in November.

Based on manufacturers polled in a survey, the ministry said it expected output to climb 8.9% in January and fall 0.3% in February.

But the forecasts do not factor in the sharp resurgence of COVID-19 infections seen in early January that led to the declaration of a second state of emergency on Jan. 7, the official said.

“Downside risks to output are growing. Uncertainties remain about whether the index will return to the pre-coronavirus level,” the official said, referring to a reading of 95.8 in March.

Still, the industry ministry retained its assessment of the data, saying output at factories and mines was “picking up.”

Some private-sector economists also warned that the ministry’s estimate for January may not fully take into account the negative effect of the global shortage of semiconductors on manufacturers.

“Supply restrictions, including the shortage of semiconductors for automakers and large containers for exporters, may impede the production recovery,” said Kazuma Maeda, an analyst at Barclays Securities Japan.

In December, the index of industrial shipments fell 1.6% to 92.3, while that of inventories increased 1.1% to 95.3, according to the ministry.