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Japan’s October factory output fell again due to global recession, weak chip demand According to Reuters



© Reuters. FILE PHOTO: Workers inspect machinery at the factory of aircraft components manufacturer Aoki in Higashiosaka, Japan June 22, 2022. REUTERS/Sakura Murakami/File Photo

By Kantaro Komiya and Kaori Kaneko

TOKYO (Reuters) – Japan’s factory output fell for a second straight month in October, as stalled global demand and prolonged supply bottlenecks hampered manufacturers’ production plans. Japanese production.

The weak business activity highlights the challenges facing the world’s third-largest economy, which has lagged behind other countries in recovering from the pandemic even as the government prepares a stimulus package. another way to combat the highest inflation in 40 years.

“The manufacturing recovery is pausing. From October to December, (Japan’s) output is likely to be near zero,” said Shumpei Fujita, economist at Mitsubishi UFJ (NYSE:) Research and Consulting. change or decrease slightly from the previous quarter”. The global economic downturn is the culprit.

Factory output fell 2.6% in October from a month earlier on a seasonally adjusted basis, government data showed on Wednesday. The drop was larger than economists’ average forecast for a 1.5% drop and followed a revised 1.7% decline in September.

Manufacturing machinery output fell 5.4% due to weak demand for semiconductor manufacturing equipment and flat panel displays. Output of electronic components and equipment fell 4.1% due to weak semiconductors and liquid crystal wafers.

An official from the Ministry of Economy, Trade and Industry (METI) said that falling demand for smartphones and electronic devices in major markets like China has resulted in weak output in related sectors. mandarin.

However, manufacturing in the auto-related sector, a key industry for Japan Inc with many participating suppliers, grew by 5.6%. The METI official said that while the production of compact vehicles for the domestic market increased, the production and shipment of larger export-oriented vehicles decreased due to a lack of chips.

METI cut its assessment of industrial output for the first time in five months, saying “production is gradually picking up, but some weakness remains”.

Manufacturers surveyed by METI expect output to grow 3.3% in November and another 2.4% in December, although forecast figures are often more upbeat than actual results. .

New COVID-19 outbreaks in Chinese cities pose another risk to Japan’s manufacturing outlook, as major Japanese automakers including Toyota and Honda said they adjusted production in China due to local lockdown.

The METI official said the impact of China’s recent lockdown is still unclear, adding that the spillover effects on Japanese manufacturers may only show up in the November statistics. or December.

After a surprise drop in July-September, economists forecast 3.1% annual growth in Japan’s gross domestic product from October to December, a Reuters poll showed. seen on Tuesday.

In response to rising costs for households and businesses, exacerbated in part by the yen’s fall this year to a three-decade low, Japanese Prime Minister Fumio Kishida has issued a statement. seeking an additional budget of 29 trillion yen ($210 billion), likely to be passed by parliament later this week.

Takeshi Minami, chief economist at Norinchukin Research Institute, said in the first half of 2023, “weaker manufacturing and exports, coupled with consumption curbs amid inflationary pressures, could weigh on the economy.” Japan economy decelerates”.

($1 = 138.7500 yen)



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