Production drops in Japan

Factory output in Japan during January fell at its fastest pace since May 2020 as a production downturn in motor vehicles added to concerns about the fragility of the country’s economy.

Industrial output fell by 7.5 per cent in January compared to the previous month, data from the Ministry of Economy, Trade and Industry (METI) shows. 

That 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.

The ministry also downgraded its assessment of industrial output for the first time since July 2023, laying bare the challenges for Japan’s economy as it tries to recover from the recession it entered at the end of last year.

Production declined the most for 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.

In January, Toyota Motor Company suspended shipments of some models after finding irregularities in certification tests for diesel engines developed by affiliate Toyota Industries.

Its 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 manufacturing of electrical machinery and information and communication electronics equipment, including lithium-ion batteries, fell by 8.3 per cent.

A 21.4 per cent plunge in lithium-ion battery output was partly due to EV production adjustments worldwide, according to the METI.

Manufacturers surveyed by the ministry expect seasonally adjusted output to rise by two per cent in March.

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.