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Japan’s factory output dips more than expected as risks emerge

TOKYO (CNA) – Japan’s factory output shrank for the first time in three months in December as a decline in machinery production outweighed a small rise in autos, casting a cloud over the strength of the economic recovery.

Retail sales posted their third straight month of year-on-year gains in December as low coronavirus cases encouraged shoppers.

Record infections this month driven by the Omicron variant, however, are expected to have hit consumer sentiment.

Factory output lost one per cent in December from the previous month, official data showed yesterday, pulled down by a decline in output of general-purpose and production machinery, including chip-making equipment and engines used in manufacturing.

That meant that output, which fell faster than the 0.8 per cent decline forecast in a Reuters poll of economists, dropped for the first time in three months.

“Output especially fell among capital goods makers, probably due to the strong impact from the chip shortages,” said chief economist at Norinchukin Research Institute Takeshi Minami.
“It suggests its impact is widening even though the focus has been on the car industry.”

Automakers have been forced to curb production even as demand in key markets such as China rebounds, while they also have had to contend with soaring semiconductor demand at consumer electronic companies.

Toyota Motor, the world’s biggest car seller, said this month it expected production to fall short of an annual target of nine million vehicles for its current business year that runs until end-March due to the drag from the chip shortage.

Smoke rises from a factory in Kawasaki, Japan. PHOTO: CNA
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