Japan Industrial Production Slows in September as Carmakers Stall

By Ambar Warrick

Investing.com-- Japanese industrial production slowed more than expected in September, data showed on Monday, as heightened raw material costs and a slowdown in major automobile production weighed on overall output.

Industrial production shrank 1.6% in September, more than expectations for a drop of 1%. It was also well below the 3.4% growth seen in August, data from the Ministry of Economy, Trade and Industry (METI) showed.

A slowdown in automobile production was the biggest driver of the decrease, as supply chain disruptions also weighed. Toyota Motor Corp (T:7203), the world’s largest carmaker by sales, recently warned that an ongoing semiconductor shortage was severely hampering production, particularly for its local factories.

Monday’s data marks the end of a three-month rising streak for production, as the country relaxed most COVID-related restrictions and rolled out measures to help support the yen.

Rising inflation is the biggest hurdle faced by local manufacturers as they struggle with rapidly increasing raw material costs. A deep depreciation in the yen this year made importing commodities more expensive for local producers, while also pushing up utility costs.

Still, production of industrial equipment, chemicals and metals remained steady through the month, indicating strength in some facets of the Japanese economy.

The METI forecast that industrial production will shrink 0.4% in October on continued weakness in automobile production. Production is then expected to rise 0.8% in November, with industrial machinery production expected to help support output.

In another bright spot for the Japanese economy, retail sales grew more than expected in September.

Data showed retail sales grew 4.5% in September, beating expectations for growth of 4.1%.

The recent relaxing of most COVID restrictions saw a sharp rebound in Japanese consumer spending this year, which also helped support Japanese economic growth.

Still, the outlook for Japan’s economy remains dim, as the country struggles with a severely weakened yen and rising inflation.

While the Bank of Japan is expected to keep policy accommodative to support growth, low local interest rates are also expected to weaken the yen in the near-term.

The Japanese currency fell 0.3% to 147.94 against the dollar on Monday.