Japan Factory Output Seen Down Again in August on Supply Chain Disruption: Poll

By Reuters
September 24, 2021 Updated: September 24, 2021

TOKYO—Japan’s factory output likely fell again in August as the country’s manufacturing sector faced supply chain disruptions driven by a global chip shortage and the spread of the Delta coronavirus variant in Southeast Asia.

Retail sales also likely eased in August after a sharp rise in July, according to the poll, underscoring the fragility of domestic consumption and shattering policymakers’ hopes that Japan’s export-based recovery from the coronavirus pandemic would become more broad-based.

Separate data is expected to show Japan’s jobless rate inched up in August and job availability eased a tad, also boding ill for consumer spending, which makes up over half of the world’s third-largest economy.

The batch of weak data underscores the challenge the new leader of the ruling Liberal Democratic Party (LDP), and hence the new prime minister, will face as he or she seeks to battle COVID-19 while keeping the economy afloat.

Data from the Ministry of Economy, Trade and Industry is expected to show industrial output fell 0.5 percent in August from the previous month, according to the Reuters poll of 19 economists. Output fell for a second straight month but at a slower pace than in July, when it declined 1.5 percent.

Japan’s recovery has been led by exports of cars and capital goods. Analysts worry a supply crunch in Southeast Asia and a slowing Chinese economy could hurt output and export demand respectively, threatening to derail the Japan’s rebound from the pandemic-led slump.

“Car production remained under pressure for adjustment and China’s pick-up from the COVID pain appeared to be stalling,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

Economists in the poll saw retail sales declining 1.0 percent in August from a year earlier, after growing 2.4 percent in July, as the hit to service sector activity from the COVID-19 crisis lingered. It would be the first year-on-year decline in six months.

The Ministry of Economy, Trade and Industry will release both industrial output and retail sales data on Sept. 30 at 8:50 a.m.(Sept. 29 at 2350 GMT).

The country’s unemployment rate was expected to worsen, rising a tad to 2.9 percent in August from 2.8 percent in July, while the jobs-to-applicants ratio was projected to ease slightly to 1.14 from 1.15 in the previous month.

Job figures will be released on Oct. 1 at 8:30 a.m. (Sept. 30 at 2330 GMT).

Housing starts data, due on Sept. 30 at 2 p.m. (0500 GMT), is likely to show a 9.5 percent increase in August, after a 9.9 percent gain in July.