Japan factory output rises 0.1% in February as demand rebounds

Japan factory output rises 0.1% in February as demand rebounds

TOKYO Reuters- Japanese factories posted their first increase in output in three months in February, as resilience in global demand led to a rebound in car production, a sign that policymakers are hoping to keep the country's fragile economic recovery on track.

The increase was smaller than market expectations, underscoring the impact of supply chain bottlenecks and other risks, such as surging costs of raw materials.

In February, factory output increased by 0.1% from the previous month, according to official data released on Thursday, as growing production of cars and transport equipment offset a decline in chemicals.

The output returned to growth after slipping 0.8% in January and 1.0% in December. The increase was weaker than the 0.5% gain predicted in a Reuters poll of economists.

The outlook for the world's third-largest economy has weakened after Russia's invasion of Ukraine last month, as commodity prices and energy prices went up. As supply chain disruptions increase, prices for raw materials have surged, which has saddling exporters with higher input costs.

In Ukraine, the situation is likely to worsen the parts shortage, said Takumi Tsunoda, senior economist at Shinkin Central Bank Research.

There is a chance that the recovery in output will be delayed further. Japan's largest market, China, is facing a lot of coronaviruses related disruptions.

The output of cars and other motor vehicles rose 10.9% from the previous month in February, rebounding after a contraction in January due to pressure from parts shortages.

In March, the ministry of economy, trade and Industry, METI predicted output to increase by 3.6% and 9.6% in April.

The forecasts did not take into account any output disruptions caused by a powerful magnitude 7.4 earthquake that struck off Japan's northeastern coast on March 16, which resulted in plant shutdowns at Toyota Motor Corp and other firms.

Tom Learmouth, an economist at Capital Economics, said that Japanese firms' production plans for the months ahead are increasingly too optimistic.

There are fresh headwinds of potential supply chain disruption in Russia and China, which could keep the handbrake on Japanese industrial production, pushing back any rebound later in the year.