TOKYO - Japan’s January factory output fell at the fastest pace since May 2020, government data showed on Feb 29, as a production downturn in motor vehicles added to concerns about the fragility of an economy that slipped into recession in late 2023.
Industrial output fell 7.5 per cent in January from the previous month, data from the Ministry of Economy, Trade and Industry (Meti) showed. It was slightly worse than the median market forecast for a 7.3 per cent drop, with output sliding in 14 of the 15 industries surveyed by Meti.
The ministry also downgraded its assessment of industrial output for the first time since July 2023, laying bare the challenges for the Japanese economy as it tries to recover from the recession.
Analysts at Capital Economics say the data suggests the economy may have contracted again in the current quarter.
“The plunge in industrial production in January suggests that gross domestic product will fall yet again this quarter, which will add to the view that Japan’s economy is in recession,” said Capital Economics assistant economist Gabriel Ng.
Production declined the most in motor vehicles, down 17.8 per cent in January from the previous month. Output decreases in regular passenger cars and electrical drive systems pulled down the overall figures.
Japanese automaker Toyota Motor in January suspended shipments of some models after finding irregularities in certification tests for diesel engines developed by affiliate Toyota Industries.
Toyota’s small car unit Daihatsu also continued to suspend production at its domestic plants through January due to misconduct related to rigged collision safety tests. The company started a gradual resumption of operations in February.
“The drop in automobile-related production, which had remained exceptionally strong amid stagnant (industrial) production due to weak global demand for goods, is a major blow to the Japanese economy,” said Daiwa Securities economist Kota Suzuki.
The manufacturing of electrical machinery and information and communication electronics equipment, including lithium-ion batteries, also sank 8.3 per cent.
The 21.4 per cent plunge in lithium-ion battery output was partly due to electric vehicle production adjustments worldwide, a Meti official said.
Manufacturers surveyed by the ministry expect seasonally adjusted output to increase 4.8 per cent in February and rise 2 per cent in March.
However, the Meti official said that the forecast production gains for February and March are not large enough to offset January’s drop.
A powerful earthquake that hit Japan’s Noto Peninsula on New Year’s Day appears to have had limited impact on manufacturers’ plans in January, although the potential effect for February and beyond is unclear, the official added.
Separate data on Japanese retail sales offered hope that consumption will help offset some of the pressure coming from the industrial sector. Sales rose 2.3 per cent in January year on year for a 23rd straight month of increases, and matched the median market forecast. REUTERS
