Japan's October Light Manufacturing Production Falls 2.6% MoM... Declines for Two Consecutive Months

Overseas Demand Slowdown and Raw Material Price Increase Impact
Ministry of Economy and Industry Lowers Forecast
Concerns Over US Interest Rate Hike Effects

[Image source=AP Yonhap News]

[Asia Economy Reporter Lee Ji-eun] Japan's industrial production for October, which indicates the business conditions of manufacturing and other sectors, decreased by 2.6% compared to the previous month, marking a decline for two consecutive months.

According to the Nihon Keizai Shimbun on the 30th, Japan's Ministry of Economy, Trade and Industry announced that the preliminary industrial production index for October (2015=100, seasonally adjusted) was 95.9.

Japan's industrial production index recorded negative growth for two consecutive months. It is analyzed that the production index decreased due to a sharp rise in raw material prices and a slowdown in overseas demand. Previously, the Ministry of Economy, Trade and Industry predicted that the production index would show a gradual recovery as logistics congestion caused by China's COVID-19 lockdown measures eased, but in the October announcement, they revised the outlook to state that "there appears to be some stagnation in the recovery trend."

By industry, out of the total 15 sectors, production declined in 8 sectors. In particular, production decreases were prominent in the semiconductor manufacturing equipment and chemical industries. Electronic components and devices decreased by 4.1%, and the chemical industry decreased by 4.9%. This is analyzed to be due to a sharp drop in semiconductor manufacturing equipment and memory production as smartphone demand declined. The automobile sector saw a 5.6% increase in production volume.

However, the Ministry of Economy, Trade and Industry forecasted that the production forecast index, calculated based on production plans of major companies, will rise by 3.3% in November and 2.4% in December compared to the previous month. This is interpreted as reflecting the partial resolution of logistics congestion following China's easing of COVID-19 lockdown measures in June.

Nevertheless, Nihon Keizai Shimbun reported that the impact of the U.S. interest rate hikes on Japanese manufacturing could appear as early as next year, leaving uncertainty in the outlook.