Japan’s factory output exceeds expectations in March – METI

Japan’s factory output exceeded expectations in March, primarily driven by automakers resuming operations after addressing safety issues, according to Reuters citing the government data released on Tuesday.

Industrial output climbed by 3.8 per cent from the previous month, surpassing the market consensus of 3.5 per cent, as the Ministry of Economy, Trade and Industry (METI) reported.

Gabriel Ng, an assistant economist at Capital Economics told Reuters, “The robust rebound in industrial output in March, along with promising production forecasts for April and May, suggests a significant recovery this quarter following the anticipated decline in GDP in Q1.”

March witnessed a 9.6 per cent surge in motor vehicle production compared to the prior month, with notable contributions from regular passenger cars and trucks.

Toyota Motor, which resumed production of certain models in early March following certification test irregularities within its affiliate Toyota Industries’ diesel engines, experienced a noteworthy increase in output.

Similarly, Daihatsu, Toyota’s small-car unit entangled in misconduct surrounding collision-safety tests, gradually resumed vehicle production starting from February.

METI highlighted an 11.6 per cent rise in production machinery manufacturing, including semiconductor production equipment, alongside a 9.2 per cent increase in electronic parts and device output.

Projections from manufacturers surveyed by the industry ministry anticipate a 4.1 and 4.4 per cent month-on-month increase in adjusted output for April and May, respectively.

Meanwhile, US stocks closed higher on Monday, with significant gains from Tesla and Apple, ahead of the Federal Reserve’s forthcoming policy meeting and its implications for interest rates.

However, concerns were raised by METI officials regarding potential downward pressure on factory output in April due to prolonged disruptions at Toyota’s domestic plant related to quality checks for Prius cars.

Separate data revealed a 1.2 per cent year-on-year (YoY) expansion in Japanese retail sales for March, falling short of the market’s expectation of a 2.2 per cent increase but marking the 25th consecutive month of growth. Month-on-month, retail sales contracted by 1.2 per cent in March, following a 1.7 per cent rise in February.