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Japan’s factory output rebounds from dismal start to quarter
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
Japanese exports grew for a fourth consecutive month in March as the weak yen provided a tailwind and demand in China picked up.
Japan’s factory output rebounded more than expected, reversing from two months of declines, in a sign of improvement in the manufacturing sector after a poor start to the year.
Industrial production rose 3.8% in March from February, as demand picked up following the lunar year holidays in China, industry ministry data showed Tuesday. The result compared with a consensus forecast for a 3.3% gain.
Other reports showed retail sales fell 1.2% from the previous month, while the labor market remained tight.
Japan’s labor market showed further signs of tightness in March, driven by a manpower shortage across a swath of sectors. The job-to-applicants ratio edged higher to 1.28, topping economists’ expectations for the gauge to be unchanged at 1.26, the labor ministry reported, while the unemployment rate held steady at 2.6%, according to the ministry of internal affairs.
The improvement in output comes after weakness early in the first quarter, as a New Year’s Day earthquake northwest of Tokyo and output suspensions in the auto industry weighed on activity from January. On a quarterly basis, output slumped 5.4% in the January-March period, the worst performance since the second quarter of 2020.
Still, the readings of production, retail sales and the labor market broadly support the government’s view that Japan’s modest economic recovery remains intact. Policymakers are hopeful that strong wage hikes in the current fiscal year will spur consumption, supporting growth and demand-led price gains, in a virtuous cycle that would allow domestic demand to become the main driver for the economy.
External demand has been the main engine of growth recently. Exports grew for a fourth consecutive month in March as the weak yen provided a tailwind and demand in China picked up.
There are risks to the outlook. The International Monetary Fund raised its expectations for global economic growth while warning that the outlook remains fragile due to persistent inflation and geopolitical risks.
The World Trade Organization offered a similar assessment last month, flagging expectations for a gradual recovery in global commerce in the early months of 2024 while citing the possibility gains could evaporate because of regional conflicts and geopolitical tensions.
Japan’s factory production is expected to rise 4.1% in April and gain 4.4% in May, according to the industry ministry.
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