Japan's October factory output falls 4.2%, jobless rate holds steady

TOKYO • Japan's industrial output slipped at the fastest pace since early last year in October, exposing widening cracks in the economy which faces a decline in domestic and foreign demand.

Output fell 4.2 per cent in October from a month ago, trade ministry data showed yesterday, below the median market forecast for a 2.1 per cent fall and swinging from a 1.7 per cent rise the previous month. That matched a similar fall in January last year.

Manufacturers surveyed by the Ministry of Economy, Trade and Industry expect output to decline 1.5 per cent this month and rise 1.1 per cent in December, the data showed. Production was pushed down by a fall in output of passenger cars and car engines, and general purpose and production machinery.

The fall in car production has raised concerns that the government's sales tax hike last month will have a more sustained impact on demand. "It is increasingly likely that there will be negative growth (in the fourth quarter)," said Norinchukin Research Institute's chief economist Takeshi Minami. "Domestic demand is growing worse," he said.

The weak reading follows gloomy data this week that may fuel calls on the government to craft a stimulus package to keep the economic recovery intact.

Official data on Thursday showed retail sales plunged at their fastest pace since early 2015 in October following the twice-postponed tax hike, boding ill for domestic demand. The hit to consumption was also exacerbated by a typhoon across eastern and central Japan last month. A government official said output was impacted by temporary factory shutdowns due to the typhoon and slowing production of big-ticket items following the tax hike.

A silver lining in the data came from a 0.9 per cent rise on the previous month in electronic parts and devices, which also saw inventories increase 8.8 per cent, suggesting firms may be preparing for an upturn in the IT cycle, although production in this sector tends to be volatile.

Factory activity and the broader economy are likely to remain under pressure as weak manufacturers' confidence, soft retail consumption and a delayed pick-up in global growth hit demand.

Meanwhile, Japan's jobless rate and jobs-to-applicants ratio held steady in October, separate official data showed yesterday, suggesting the nation's tightest jobs market in decades is holding up.

The seasonally adjusted unemployment rate was steady at 2.4 per cent, matching economists' median forecast, figures from the Ministry of Internal Affairs and Communications showed.

The jobs-to-applicants ratio held steady at 1.57 in October from the previous month, health ministry data showed.


A version of this article appeared in the print edition of The Straits Times on November 30, 2019, with the headline 'Japan's October factory output falls 4.2%, jobless rate holds steady'. Subscribe