Japan’s industrial production rebounded in June, capping a quarterly gain that suggests a modest recovery continued in the second quarter.
(Bloomberg) — Japan’s industrial production rebounded in June, capping a quarterly gain that suggests a modest recovery continued in the second quarter.
Factory output rose 2% from the previous month, rebounding from the previous month and led by increases in cars and electronic devices, according to the industry ministry Monday. Economists had forecast a 2.4% advance. The gauge rose 1.3% in the second quarter from the first one.
The data points to an ongoing recovery in the world’s third largest economy helped by healing supply chains, despite slowdown signs abroad. The nation’s trade balance swung to its first surplus since July 2021 last month, with exports holding up while imports slid on the back of falling fuel prices.
“The recent pick up in auto production is a positive factor,” said Chisato Oshiba, an economist at Dai-Ichi Life Research Institute. “Car exports are also recovering, so I expect the gradual recovery trend will continue, though it won’t necessarily be the case for other machinery.”
Another report showed that retail sales fell 0.4% in June from May, compared with a 0.7% decline forecast by analysts. Outlays rose 5.9% from a year ago.
A return of overseas tourists has been boosting consumption in Japan compared to the previous year, partly because the weaker yen increases their spending power. Last month the number of visitors from abroad was back to more than 70% of pre-pandemic levels, returning to above 2 million, according to the Japan National Tourism Organization.
But domestic shoppers face mixed circumstances in that inflation continues to outpace the rise in their paychecks. Tokyo inflation came in slightly stronger than expected Friday, while the latest readings for labor market data are due on Tuesday.
What Bloomberg Economics Says…
“We see production hovering around the current level for the next 2-3 months, as the damage from weak foreign demand and the benefits from healing supply chains roughly balance out.”
— Taro Kimura, economist
For the full report, click here
Overseas factors such as the impact from continued monetary policy tightening and further slowdowns in the Chinese economy could affect Japan as well. Analysts expect Japan’s economy to record another three months of growth in the second quarter, albeit at a slower pace than in the first quarter.
China’s economy lost momentum in the second quarter, while Beijing has hinted that stimulus measures this year will likely be limited in scale.
“Exports are expected to remain sluggish due to the slowdown in overseas economies, the lack of resilience in China and other factors,” said Dai-ichi Life’s Oshiba, adding that continued rate hikes abroad should still be viewed with caution. “Industrial production will also likely remain modest for the same reasons.”
The Bank of Japan also jolted financial markets last week by loosening its grip on bond yields in Governor Kazuo Ueda’s first surprise move since taking the helm. While the bank’s main settings remained unchanged, Friday’s adjustments will likely continue to spur talk of potential policy normalization to come, speculation that would help strengthen the yen against the dollar.
–With assistance from Tomoko Sato.
(Updates with more details from the report, economist comments)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.