Japan’s Industrial Output Shows Less Severe Contraction. Labor Market Improves

Manufacturing output across the world's third largest economy posted a smaller contraction than feared during the month of July while firms

Aiswarya Gopan•Tuesday, August 31, 2021•1 min read

Japan's Industrial Output Shows Less Severe Contraction. Labor Market Improves

Manufacturing output across the world’s third largest economy posted a smaller contraction than feared during the month of July while firms express optimism about a rebound to growth in the current month. According to data released by the government, Japan’s factory output dropped by 1.5% MoM in July against economists’ expectations for a contraction by 2.5% instead.

In addition, manufacturers surveyed by the government forecast an increase in output during August by 3.4% which could continue to grow at a slower pace in September, by 1%. The fall in industrial output was driven by a severe contraction in car production, as a result of the fresh spike in coronavirus cases across most of Japan’s key trading partners in Asia.

In addition, the overall manufacturing sector was also weighed down by the rampant spread of COVID-19 infections from the delta variant, which has forced the government to extend emergency measures which put pressure on economic activity. The pandemic has also caused a shortage of raw materials and impacted supply chains across the continent, further impacting factory output.

On a positive note, however, manufacturing of production machinery items posted a growth, helping keep the contraction in overall industrial output limited. In August and September, manufacturing firms expect production machinery manufacturing output to continue growing while they anticipate an uptick in output of transport equipment, including car production.

Meanwhile, Japan’s jobless rate has eased lower for the second consecutive month, dropping from 2.9% in June to 2.8% in July. In addition, the job availability index also picked up from 1.13 in June to 1.15 in July, a sign of improving conditions in Japan’s labor market.

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ABOUT THE AUTHOR See More

Aiswarya Gopan

Financial Writer & Editor - Asia & Europe Desk

Aiswarya Gopan is a former cybersecurity analyst, tech journalist and market researcher, who joins FX Leaders with over three years of experience in the blockchain industry. Aiswarya's areas of focus include market news out of the Asian and European markets as well as news coverage on cryptocurrencies.