Japan factory output dips 2.6 pct in October on global demand

Japan factory output dips 2.6 pct in October on global demand

Workers check the machinery at the factory of the Aoki company in Higashiosaka, Japan on June 22, 2022. SAKURA MURAKAMI FILE PHOTO REUTERS TOKYO Japan's factory output fell for a second consecutive month in October, as stalling global demand and lingering supply bottlenecks put a lid on Japanese manufacturers' production plans.

Even as the government prepares another stimulus package to counter 40 year-high inflation, the world's third-largest economy is lagging behind peers in recovering from the pandemic.

The production pickup is pausing. The global economic slowdown is a factor in the production of Japan for Oct-Dec, according to Shumpei Fujita, economist at Mitsubishi UFJ Research and Consulting.

In October, factory output fell 2.6 percent from a month earlier on a seasonally adjusted basis, government data showed on Wednesday. The dip was larger than the median forecast of 1.5 percent decline by economists, and followed a revised 1.7 percent decline in Sept.

Production machinery output fell by 5.4 percent, taking a hit from soft demand for equipment to make semiconductors and flat-panel displays. Electronic parts and devices output decreased by 4.1 percent as semiconductors and liquid crystal panels were weak.

A METI official told the Ministry of Economy, Trade and Industry that China's declining demand for phones and electronic devices has resulted in a weakened output in the related sectors.

Production in the auto-related sector, a key industry for Japan Inc with many suppliers involved, advanced 5.6 percent. The METI official said that the production of compact cars for the domestic market grew, but the shipment of export-oriented larger vehicles was down due to chip shortages.

In its analysis of industrial output for the first time in the past five months, METI said production is slowly picking up, but some weaknesses are noted. Manufacturers who were surveyed by METI expected output to rise 3.3 percent in Nov and another 2.4 percent in December, although the forecasts are usually more bullish than actual results.

READ MORE: Japan has a record trade deficit in August as energy imports soar.

Major Japanese carmakers including Toyota and Honda said they have adjusted production in China due to local lockdowns because of the new COVID 19 outbreaks in Chinese cities.

The impact of China's recent lockdown remains unclear, according to a METI official, who said that the spill-over effects for Japanese manufacturers may only appear in Nov or Dec statistics.

After a surprise contraction in July-Sept, economists predicted annualized 3.1 percent growth in Japan's Oct-Dec gross domestic product, according to a poll by Reuters on Tuesday.

Japanese Prime Minister Fumio Kishida has sought another 29 trillion yen $210 billion extra budget, which will pass the Parliament later this week to counter increasing costs for households and businesses, partly exacerbated by the decline of the yen this year to three-decade lows.

READY: Japan's economy is going to slow down as inflation, recession risks hurt the economy.

In the first half of 2023, a slowdown in Japan's economy may result, said Takeshi Minami, chief economist at the Norinchukin Research Institute, as well as a reduction on consumption and production in the first half of 2023.