Japan’s factory output likely fell back into contraction in July

JAPANESE factories likely cut back output in July after the prior month’s near double-digit surge, a Reuters poll showed on Friday (Aug 26), as manufacturers struggled to shake off the drag from supply disruptions and a high-tech chip shortage.

Industrial production in the world’s third-largest economy likely slipped 0.5 per cent in July from the previous month, according to the median forecast of 18 economists in the poll.

Output had surged 9.2 per cent in June after China eased Covid-19 curbs and the major Chinese city of Shanghai came out of a pandemic lockdown at the beginning of that month.

Japan’s economy rebounded at a slower-than-expected pace in the second quarter from a Covid-induced slump, data showed this month while growing fears of a global slowdown are clouding the outlook for the trade-reliant nation.

Takeshi Minami, chief economist at Norinchukin Research Institute, cautioned that Japanese manufacturers were unlikely to be out of the woods, adding that he expected demand for their products to stagnate ahead.

“As for the outlook, the semiconductor shortage is becoming chronic and caution about surging prices and the acceleration of interest rate hikes overseas is high,” he added.

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Separate Ministry of Economy, Trade and Industry (METI) data is expected to show retail sales in July rose 1.9 per cent from a year earlier, quickening from a 1.5 per cent rise previously, supporting the view consumption is recovering moderately from its pandemic hit.

METI will release the factory output and retail sales data at 8.50 am on Aug 31 (11.50 pm GMT Aug 30).

Job availability and the jobless rate were expected to hold steady from the previous month in July, coming in at 1.27 and 2.6 per cent, respectively.

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The government will release jobs data at 8.30 am on Aug 30 (11.30 pm GMT Aug 29). REUTERS