Industrial output in Japan, the world’s third-largest economy, extended gains in April as manufacturers benefited from a recovery in demand for capital goods, especially from overseas.
Official data released on Monday showed that Japanese factory output increased by 2.5% in April from March’s figure. The increase was due to the higher production of general-purpose and electrical machinery which managed to offset a contraction in the output of cars and transportation equipment.
The growth in output surpassed March’s 1.7% gain. However, April’s figure was weaker than the 4.1% increase forecast by market analysts. The shortfall was attributed to supply issues with semiconductors having a negative effect upon car production.
Ayako Sera, market strategist at Sumitomo Mitsui (NYSE:SMFG) Trust Bank said of the Japanese industrial output data:
“It confirmed Japan’s output has been improving steadily due to export-driven gains,”
“But it’s hard to get excited by the overall picture as domestic conditions are very stagnant due to the coronavirus.”
Japanese Economy Still Showing Fragility
Despite the strong economic news from Japan, the Japanese economy is still showing fragility.
There are concerns that the Japanese economy could slide into recession in this current quarter. The government extended a COVID-19 emergency for Tokyo and other major areas until June 20th, which is negatively impacting domestic consumer spending.
Having emerged from last year’s decline, Japan’s economy contracted in the first quarter of 2021. The slow vaccine rollout and repeated emergency measures dealt a heavy blow to consumer consumption.
In April, retail sales surged 12.0% on an annual basis. The large increase was mainly due to statistical base effects but also a strong demand for general merchandise and clothing.
However, Japanese Retail sales, fell 4.5% on a seasonally adjusted basis compared to March’s data, as consumer sentiment was negatively impacted by the most recent measures in battling to halt the spread in coronavirus infections.
