Japan April Industrial Output Dips Unexpectedly on Weaker Demand for Production Equipment amid Global Slowdown

–METI Survey: Output Likely to Post 2nd Straight Dorp in May, Rise in June 

–METI Keeps View After Last Month’s Upgrade: Output Showing Gradual Pickup

–METI Repeats: To Watch Effects of Parts Shortages, Inflation

By Max Sato

(MaceNews) – Japan’s industrial production unexpectedly fell on the month for the first drop in three months, hit by weaker global demand for equipment to produce semiconductors and flat-panel displays, preliminary data released Wednesday by the Ministry of Economy, Trade and Industry showed.

From a year earlier, factory output marked its sixth consecutive drop, also coming in weaker than expected. 

The METI’s survey of producers indicated that output is expected to record a second straightly monthly drop in May amid slowing global economic growth before rebounding moderately in June.

The ministry maintained its assessment after upgrading it April for the March data, saying industrial output “is showing signs of a gradual pickup.” Previously, it had said, production “has weakened.”

The METI repeated that it will keep a close watch on the effects of parts and materials supply shortages and rising prices. Last month, it dropped its reference to the impact of a rise in Covid cases on domestic and global growth as it had been largely contained in Japan.

The key points from the data:

* Industrial production fell a seasonally adjusted 0.4% on the month in April, coming in much weaker than the median economist forecast of a 1.8% rise (forecasts ranged from 1.1% to 1.9% gains). It followed a 1.1% rise (revised up from a 0.8% rise) in March, a 4.6% rebound in February, a 5.3% slump in January and a 0.3% rise in December.

* Based on its survey of manufacturers, METI projected that industrial production would rise 1.9% on the month in May (revised from a 2.0% fall forecast last month) and gain 1.2% in June. Adjusting the upward bias in output plans, however, METI forecast production would fall 2.6% in May. Improving supply chains should support the auto industry but “there is a risk of production plans being revised down by a slowdown in overseas economic growth,” the METI said.

* From a year earlier, the production index dipped 0.3% in April, marking the sixth straight drop after falling 0.6% (revised from a 0.7% fall) in March. It was weaker than the median economist forecast of a 1.9% rise (forecasts ranged from 1.6% to 2.0% gains).

* The index of industrial production (100 in the 2015 base year) stood at 95.5 in April, down slightly from 95.9 in March but above 94.9 in February and an eight-month low of 90.7 in January. It is well above the recent bottom of 77.2 hit in May 2020 but below 99.1 seen in January 2020, when the pandemic hadn’t had a widespread impact yet. The index briefly jumped to 100.2 in August 2022.

* Of the 15 industries, five posted decreases from the previous month, nine recorded increases and one was unchanged. Makers of semiconductor-producing equipment faced slower global and domestic demand and those of flat-panel displays saw lower orders from overseas.

* Production fell during the first wave of the pandemic in 2020. After a pickup later that year, more waves of infections caused logistical bottlenecks amid reopening demand and prompted parts supply delays from Southeast Asia, where lockdowns hit factory operations in August 2021. Later, easing supply bottlenecks pushed up production from October to December 2021. Output has since fluctuated widely, ending fiscal 2022 to March 2023 with a slight 0.2% drop on the year following a 5.8% jump in fiscal 2021 and a 9.6% slump in fiscal 2020.