Japan’s factories boost output for third month in August

JAPAN’S factories ramped up output for a third straight month in August, as the manufacturing sector showed resilience amid high material costs and worries about a global economic slowdown.

Policymakers in the world’s third-largest economy are concerned about recession risks in the United States and other major trading partners, which would make Japan increasingly reliant on domestic consumption for growth.

Factory output gained a seasonally adjusted 2.7 per cent in August from a month earlier, official data showed on Friday (Sep 30), extending rises in the prior 2 months.

Separate figures showed retail sales rose sharply to expand for a sixth straight month in August, while the latest jobs data pointed to tightening labour market conditions.

“Manufacturers’ production activity was firm and production was on an upward trend, as far as for the August data,” said Koya Miyamae, senior economist at SMBC Nikko Securities.

“But there is a possibility that production may stagnate in October-December due to the global economy slowing down.”

The increase, which was much stronger than a median market forecast for a 0.2 per cent gain expected by economists in a Reuters poll, got a lift from firmer output of production machinery and iron, steel and non-ferrous metals.

That helped offset a 6.3 per cent slump in electronics parts and devices output and a decline in motor vehicle production, which swung into contraction after posting double-digit gains in June and July.

Toyota Motor, the world’s top automaker by sales, reported a month-on-month decline in Japanese output in August, although its global production rose.

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The drop in electronic parts and devices production was largely due to falling output of memory chips on weaker smartphone and personal computer demand, a government official said, adding this presented downside risks to the outlook.

Despite worries about the negative impact of surging prices, Japan’s economy was still expected to continue growing throughout 2022, as consumers were likely to keep going out, Miyamae added.

Separate data showed retail sales grew more than expected, rising 4.1 per cent in August from a year earlier, compared with a median forecast for a 2.8 per cent gain in a Reuters poll.

Retail sales were helped by stronger sales at medicine and toiletry stores as well as of fuel, general merchandise, and fabrics apparel and accessories.

The seasonally adjusted jobless rate was 2.5 per cent in August, compared with the previous month’s 2.6 per cent, while the availability of jobs stood at 1.32, marking its highest since March 2020. REUTERS