On April 23, 2021, a man rides a bicycle before the Keihin industrial zone in Kawasaki, Japan. PHILIP FONG AFP TOKYO- Japan's factory output posted the biggest monthly drop in two years in May, as semiconductor and other parts shortages hit manufacturers, adding pressure on an economy struggling to mount a strong recovery.
The decline highlights the challenge that the world's third-largest economy faces in overcoming supply disruptions and high prices of raw materials and energy that analysts say could weaken global demand.
In May, factory output fell by a seasonally adjusted 7.2 percent from the previous month, official data showed on Thursday, as production of items such as cars as well as electrical and general-purpose machinery fell sharply.
The decline was the sharpest monthly decline since a 10.5 percent month-on-month drop in May 2020, but was larger than the 0.3 percent fall predicted by economists in a Reuters poll.
The plunge in industrial output in May suggests that Japan's recovery is disappointing yet again, said Marcel Thieliant, senior Japan economist at Capital Economics.
He said supply shortages are the main cause of the problem. The fact that inventories were stable despite plunging output suggests that weak demand is playing a role. Pedestrians walk along a street in Tokyo's Ginza district on June 26, 2022. PHILIP FONG AFP The data comes a day after Toyota Motor Corp, the world's largest automaker by sales, missed its already downgraded global production target for May.
Toyota produced 634,940 vehicles globally last month, compared to its target of 700,000, which it had lowered by 50,000 from 750,000 in mid-April.
Takeshi Minami, chief economist at Norinchukin Research Institute, said that sluggishness in demand is likely to hurt output ahead.
The Japan services sector is picking up thanks to a modest post-pandemic spending rebound, while the manufacturing sector is facing pressure from parts and high-tech chip supply disruptions.
The government cut its assessment of industrial production, saying it was weakening, a downgrade from its previous view that output was stalling.
In June, the Ministry of Economy, Trade and Industry said that the output of the company would rebound 12.0 percent, followed by a 2.5 percent expansion in July.