Japan’s Aug factory output extends declines on car production cuts

September 30, 2021

By Kantaro Komiya and Yoshifumi Takemoto

TOKYO (Reuters) – Japan’s industrial output fell for the second straight month in August as COVID-19 outbreaks elsewhere in Asia disrupted supply chains for carmakers already facing headwinds from a prolonged chip shortage.

Separate data out on Thursday showed retail sales in August slipped for the first time in six months as households cut spending amid a coronavirus relapse, signalling lacklustre consumer sentiment.

The data suggests the pandemic continued to gnaw at Japan’s economy this quarter, posing an immediate challenge to the next prime minister, Fumio Kishida, who won the ruling party leadership vote on Wednesday.

Factory output lost 3.2% in August from the previous month, official data showed on Thursday, hit by weaker production of cars and electronic machines and marking the second consecutive month of contraction after a 1.5% drop in July.

The decline was larger than the 0.5% fall forecast in a Reuters poll of economists.

Major Japanese automakers including Toyota Motor Corp, Nissan Motor Co and Honda Motor Co have faced production cuts since late August due to components shortage, which could have a lasting impact well into October, the industry lobby warned earlier this month.

Manufacturers surveyed by the government expect output to rise 0.2% in September and 6.8% in October.

The government downgraded its assessment of industrial production for the first time since April 2020, saying it was “stalling”.

Analysts expect the world’s third-largest economy to grow at an annualised pace of 1.2% this quarter, much weaker growth than other advanced economies, as stop-go coronavirus curbs reined in private consumption.

Separate government data on Thursday showed retail sales were weaker than expected, falling 3.2% in August from a year earlier.

That marked first decline in six months and was larger than the median market forecast for a 1.0% fall.

The worse-than-expected retail sales came after Japan said earlier this week it would lift coronavirus curbs in all regions by Thursday given a stark fall in COVID-19 cases and as around 60% of the population have been fully vaccinated.

Compared with the previous month, retail sales declined a seasonally adjusted 4.1%.

(Reporting by Kantaro Komiya and Yoshifumi Takemoto; Editing by Daniel Leussink and Sam Holmes)

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