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Export-Reliant Japan Faces Setback as Factory Output Declines

Export-Reliant Japan Faces Setback as Factory Output Declines

Export-Reliant Japan Faces Setback as Factory Output Declines

Export-Reliant Japan Faces Setback as Factory Output Declines

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  • Japan’s Nov exports drop 0.9%, with 2.5% in auto and 3.5% in electronics.
  • Manufacturers predict 6.0% Dec rise but fear 7.2% Jan decline, hinting at uncertainty.
  • Global downturn, rising prices, and Toyota’s Daihatsu halt pose challenges; Nov retail sales up 5.3%, a positive.
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Japan, known for its export-driven economy, is grappling with a setback as factory output declined in November, according to data released by the Ministry of Economy, Trade and Industry (METI) on Thursday.

Industrial production in Japan saw a 0.9% decline in November compared to the previous month, with the fall in auto production playing a significant role. While this figure was better than the median market forecast of a 1.6% drop, concerns linger about the impact on the export-reliant economy.

Motor vehicle production, a crucial component of Japan’s industrial output, fell by 2.5% in November. The slowdown was attributed to a decrease in the manufacturing of small cars and engines. Additionally, output in electrical machinery and information and communication electronics equipment witnessed a 3.5% decline, reflecting sluggish demand in semiconductor and integrated-circuit testing equipment.

Manufacturers surveyed by the industry ministry remain cautious, expecting a 6.0% increase in seasonally adjusted output in December but foreseeing a significant 7.2% decline in January. METI’s assessment of industrial output maintains a “seesawing” pattern, indicating uncertainty in the economic landscape.

The recent production halt at Toyota Motor’s small car unit, Daihatsu, due to a safety scandal, is poised to exert further downward pressure on output starting January. The small car specialist has suspended production in Japan until the end of next month.

Kota Suzuki, an economist at Daiwa Securities, commented, “Automobile-related production has recovered steadily this year, thanks to easing supply constraints, but the risk of production cuts will need to be watched carefully in the near term.”

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The METI official expressed concerns about the impact of the global economic downturn and rising prices, emphasizing the need for ongoing monitoring.

On a separate note, recent data revealed that Japanese retail sales expanded by 5.3% in November compared to the same period last year. This marked the 21st consecutive month of expansion since March 2022, providing a contrasting positive trend amid the challenges faced by the industrial sector.

As Japan navigates through these economic headwinds, the outlook on semiconductor production remains cautiously optimistic, with the METI official anticipating a gradual recovery in the coming months. The resilience of the Japanese economy continues to be tested, emphasizing the importance of monitoring global economic conditions and potential supply chain disruptions in the months ahead.

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