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Japan's Industrial Production Drops At The Fastest Pace Since Fukushima

BySober Look
Published 07/31/2013, 02:37 AM
Updated 07/09/2023, 06:31 AM
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Japan experienced a surprisingly strong decline in industrial production in June, which many view as temporary.
Industrial Production
The Japan Times: - Industrial production fell in June by the most since March 2011, when the Great East Japan Earthquake and tsunami struck, as automakers cut output after a gain the previous month.

Output declined 3.3 percent in June from May, the Ministry of Economy, Trade and Industry said Tuesday, marking a steeper fall than any economist forecast in a Bloomberg survey in which the median of 29 estimates was for a 1.5 percent drop.

In May, output climbed the most since December 2011. Production slid 4.8 percent in June from a year earlier.

Tuesday’s report adds to the challenges facing Prime Minister Shinzo Abe, who must decide whether to proceed with the consumption tax increase even though it could slow down a rebound in the economy. Weakening production would undermine his calls for higher wages to bolster his reflation efforts after temporary boosts from monetary and fiscal stimulus. Indeed this adds to the concerns described earlier (see post). Japan's new government needs to improve wage growth in order to keep up with rising prices. Without stable pay increases - which have been declining for years in large part due to demographics and Japan Inc.'s approach to cost adjustments - reaching sustainable inflation rate will be difficult. Yet higher wages could also reduce the competitiveness of Japanese companies. That is why this sudden drop in industrial production, if not corrected in July, could become an issue.

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