Japanese factories saw output rise for the second straight month in March as strong global demand for high-tech chips helped allay some doubts weighing on the country’s economic outlook.
After struggling to make a convincing recovery from the coronavirus pandemic, the world’s third-largest economy is facing pressure from Russia’s war in Ukraine, high energy and commodity prices, and strict lockdown measures. China that are affecting demand.
Factory output expanded 0.3% in March from a month earlier, official data showed on Thursday, as surging output of items such as semiconductors offset a drop in motor vehicle output.
That meant output growth slowed from February, when it grew strongly at 2.0%. The rise was weaker than the 0.5% rise forecast in a Reuters survey of economists.
Separate data showed retail sales were stronger than expected after the government lifted pandemic restrictions, rising 0.9% in March from a year earlier, which was higher than the market’s median forecast of a 0 rise. ,4%.
“Personal consumption is likely to recover, but supply constraints will weigh on production,” said Takumi Tsunoda, a senior economist at the Shinkin Central Bank Research Institute.
“Production, and especially motor vehicles, will likely be affected by the prolonged impact of the semiconductor shortage, as well as the closure in Shanghai.”
The fragile nature of Japan’s recovery has prompted the nation’s central bank to remain steadfast in its ultra-loose stance, moving against the tide of tightening policies undertaken by many major economies.
Manufacturers surveyed by the Ministry of Economy, Trade and Industry expected output to rise 5.8% in April, followed by a 0.8% drop in May.
Japan’s manufacturing sector has so far remained resilient in the face of uncertainty posed by the Ukraine situation which has led to a spike in commodity prices. A rapid weakening of the yen has also burdened exporters with higher input costs.
But private consumption, which accounts for more than half of gross domestic product, has yet to fully shake off the pandemic drag, after a record surge in omicrons delayed its recovery.
The ministry stood by its baseline assessment for March that industrial production was showing signs of recovery.
Production in eight sectors, including production machinery, grew in March, while it fell in seven sectors, including automobiles.
“We will continue to watch for a possible increase in coronavirus infections, parts supply shortages and price increases, as well as monitoring the situation in Ukraine,” a ministry official told reporters.
For all of fiscal year 2021, industrial production expanded at a record 5.8% from a year earlier after two straight years of pandemic setbacks.
The rate of increase, after a 9.6% drop in the previous year, was the highest since comparable data became available in fiscal 2014.
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