Japan's factory output unexpectedly fell in April, government data showed on Wednesday, as production machinery orders slowed amid weakening global demand, casting doubts about recovery in the world's third-largest economy.
Japan has so far been spared the impact of deteriorating global economic conditions thanks in part to a recovery in services sector activity following the country's delayed reopening from the COVID-19 pandemic and as the central bank maintains ultra-loose monetary policy.
But signs of a slowdown in U.S., European and Chinese growth cloud the outlook for the export-reliant economy.
"The current production sentiment is still bearish due to ongoing concerns about the downturn in overseas economies," a Ministry of Economy, Trade and Industry Official told reporters.
Factory output fell 0.4% in April from the previous month on a seasonally adjusted basis. The contraction dashed economists' median market forecast for a 1.5% gain.
Output of semiconductor-manufacturing equipment fell 24.6% while flat panel manufacturing equipment dropped 66.6%.
A METI official said U.S. export controls to China were not a factor in the decline in chip-making equipment shipments.
The drop in domestic and overseas orders contributed to the decrease in chip-making equipment, whereas falling demand for smartphones and vehicle equipment affected flat panel-making equipment.
Manufacturers surveyed by the METI expect output to increase 1.9% in May and 1.2% in June as easing supply parts shortages and other factors lift output of transportation and production machinery.
Still, the METI official said there is a risk of downward adjustment in production plans due to overseas weakness.
Separate data also showed Japanese retail sales rose 5% in April from a year earlier, missing forecasts for a 7% gain.
Compared with the previous month, retail sales contracted 1.2% in April, following a 0.3% rise in March, the data showed.
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