(Bloomberg) -- Japan’s industrial production contracted by a surprisingly large amount in March as falling exports weigh on the world’s third-largest economy.
Factory output slid 0.9 percent from a month earlier, compared with the median estimate of economists of no change, according to data from the trade and industry ministry Friday.
Key Insights
- Japan needs to see a strong recovery in industrial output to help drive economic growth in the lead up to a sales-tax hike in October. The increase in the levy will be a test of Prime Minister Shinzo Abe’s skill in steering the economy after previous tax hikes sent consumption plunging.
- Some economists see a risk of gross domestic product shrinking in the first quarter.
- The data from Tokyo comes a day after South Korea reported the biggest economic contraction in a decade as it is also hurt by a slowdown in exports and demand for tech products.
What Bloomberg’s Economists Say
"Key risks to the outlook are U.S. protectionism and political instability in Europe. The former would hurt Japan’s exports that feed into global supply chains, as well as autos. The latter could spur the yen up on safe-haven demand -- denting exports."--Yuki Masujima, Japan economistClick here to read more
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- Separate figures from the internal affairs ministry showed core inflation in Tokyo, an early indicator for price moves nationwide, accelerated to 1.3 percent in April. Economists had estimated an increase of 1.1 percent.
- Inflation in Tokyo was expected to have benefited this month as the prices of food and restaurant meals went up the start of the new fiscal year on April 1. The 1.3 percent reading was the highest in four years.
- Retail sales rose 0.2 percent in March from the previous month, better than expectations from economists for no change.
- The jobless rate ticked up to 2.5 percent in March, according to the ministry of internal affairs.
- The number of available jobs to applicants stayed unchanged at 1.63.
