Factory output gain shows firms' resilience
TOKYO: Japan's factory output unexpectedly rose in June, as manufacturers showed resilience even as US tariffs weighed on the nation's exports.
Industrial production gained 1.7% from the previous month, the Industry Ministry reported yesterday.
Output of transport equipment excluding cars was up 14.8%, and electronic parts and devices drove the gains.
Economists had expected a 0.8% loss.
Output increased 4% from a year earlier, topping expectations of a 1.3% gain.
Output of autos, which faced tariffs totalling 27.5% on shipments to the United States during the period, nudged 0.1% higher from the prior month.
Output for steel and non-ferrous metals declined by 0.5% after US President Donald Trump doubled the duty on US imports of steel and aluminium to 50% in early June.
'I think production increased in some areas to respond to rush demand in anticipation of the tariff hike,' said Yuichi Kodama, economist at Meiji Yasuda Research Institute.
'The trend is difficult to grasp due to such demand, but I think production largely remained flat on a quarterly basis.'
Seasonally adjusted production advanced by 0.3% in the quarter through June from the previous period, reducing the risk that the economy may have fallen into a technical recession in the period.
Bloomberg economist Taro Kimura said, 'The solid production print may prompt central bankers to reassess their cautious stance on US trade policy risks to Japan's growth.
'In our baseline scenario, the central bank will proceed with a 25 basis points rate hike in October.'
The gains are forecast to continue after the United States and Japan reached a trade agreement with terms considered more favourable to Japan than had been feared.
Last week's surprise deal will cut tariffs on US imports of Japanese cars to 15% and apply the same rate on other products.
Inventories fell 0.4% in June, the third straight month of month-on-month declines, bringing the index down to 99.1, the lowest in just over three years.
That indicates that manufacturers have room to add products in the months ahead.
Manufacturers estimated monthly production will rise 1.8% in July and gain 0.8% in August, according to yesterday's release.
Separately, retail sales exceeded estimates, rising 1% in June from May and increasing 2% from a year ago.
Persistent inflation has kept consumer spending from posting sustained gains as households contending with higher costs for essential goods trimmed discretionary outlays.
Prime Minister Shigeru Ishiba, under pressure to do more to help households cope with inflation, has pledged cash handouts to spur consumption and undertaken steps to reduce utility costs.
Ishiba's position was weakened substantially by his party's historic upper house election defeat earlier this month.
He said he would like to remain in office to ensure the implementation of the trade deal.
The production data come hours before the Bank of Japan's (BoJ) board concludes its latest policy meeting, where authorities are widely expected to keep the benchmark interest rate unchanged.
The focus will be governor Kazuo Ueda's assessment of the recent trade deal with the United States.
Officials see the possibility of mulling another interest rate hike this year after that agreement, a source said last week.
'It will take more time for the impact of tariffs to be confirmed in hard data, so the BoJ is unlikely to raise interest rates today,' Kodama said. — Bloomberg
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Star
5 hours ago
- The Star
Motor racing-Piastri confident he can win after 'bizarre' Hungarian qualifying
Formula One F1 - Hungarian Grand Prix - Hungaroring, Budapest, Hungary - August 2, 2025 Ferrari's Charles Leclerc and McLaren's Oscar Piastri after qualifying REUTERS/Jakub Porzycki BUDAPEST (Reuters) -McLaren's Formula One leader Oscar Piastri was confident he could win from second place on the starting grid after a 'bizarre and somewhat frustrating' Hungarian Grand Prix qualifying on Saturday. The Australian will line up alongside Ferrari's pole-sitter Charles Leclerc at the Hungaroring on Sunday with title rival and teammate Lando Norris in third place. "Pretty confident," Piastri, 16 points clear of Norris, said of his chances of taking a seventh win from 14 races. "It was good last year, so hopefully it can be good again this year." Piastri started second last year, with Norris on pole, and went on to take the first win of his F1 career. Sunday's race could see some rain, which could make things tricky on a twisty circuit where overtaking is already difficult and strategy can be crucial. McLaren were fastest in all three practice sessions but Leclerc made the most of the conditions to seize a surprise advantage. "If you're sat where Charles is, fantastic. If you're sat where I'm sat, bizarre and somewhat frustrating," he said when asked to sum up the session. "I think the conditions completely changed, and it was just weird. "I think our pace has been good, but Charles has been quick all weekend, in certain sessions," added the Australian. "It is a very difficult track to overtake on, and it's not going to be the easiest place to try and regain the lead." Norris, winner of four races so far this campaign, agreed with his teammate. "I think we always have, at least in the race, a bit more of an advantage. But our main competitor over the last four, five races has been Charles and it's been the Ferrari," said the Briton. "So, if there was anyone else that's going to be on pole today, it was going to be Charles. And if there's anyone that's going to make our life tough tomorrow, it's going to be the same guy." (Reporting by Alan Baldwin, editing by Ken Ferris)
The Star
5 hours ago
- The Star
Motor racing-Despondent Hamilton says he's 'useless' and Ferrari should replace him
Formula One F1 - Hungarian Grand Prix - Hungaroring, Budapest, Hungary - August 2, 2025 Ferrari's Lewis Hamilton during practice REUTERS/Bernadett Szabo BUDAPEST (Reuters) -A despondent Lewis Hamilton said he was "useless" and suggested Ferrari needed another driver after qualifying 12th for the Hungarian Grand Prix with teammate Charles Leclerc on pole position. The seven-time Formula One world champion, who is 40, has an unrivalled record in Hungary with eight wins and nine poles but Saturday's performance was far from those heights. "It's me every time. I'm useless, absolutely useless," he told Sky Sports television when explaining why he had said "every time, every time" over the radio after failing to make the cut. "The team have no problem. You've seen the car's on pole. "So we probably need to change driver." Hamilton joined Ferrari from Mercedes in January and has yet to stand on the podium for Formula One's oldest, most glamorous and successful team although he did win the Shanghai sprint from pole in March. Leclerc has had five top three finishes in 13 races so far this season. (Reporting by Alan Baldwin, Editing by Andrew Cawthorne)
The Star
7 hours ago
- The Star
From Laos to Brazil, Trump's tariffs leave a lot of losers. But even the winners like Vietnam will pay a price
WASHINGTON (AP): President Donald Trump's tariff onslaught this week left a lot of losers - from small, poor countries like Laos and Algeria to wealthy US trading partners like Canada and Switzerland. They're now facing especially hefty taxes - tariffs - on the products they export to the United States starting Aug. 7. The closest thing to winners may be the countries that caved to Trump's demands - and avoided even more pain. But it's unclear whether anyone will be able to claim victory in the long run - even the United States, the intended beneficiary of Trump's protectionist policies. "In many respects, everybody's a loser here,'' said Barry Appleton, co-director of the Center for International Law at the New York Law School. Barely six months after he returned to the White House, Trump has demolished the old global economic order. Gone is one built on agreed-upon rules. In its place is a system in which Trump himself sets the rules, using America's enormous economic power to punish countries that won't agree to one-sided trade deals and extracting huge concessions from the ones that do. "The biggest winner is Trump,' said Alan Wolff, a former U.S. trade official and deputy director-general at the World Trade Organization. "He bet that he could get other countries to the table on the basis of threats, and he succeeded - dramatically.'' Everything goes back to what Trump calls "Liberation Day'' - April 2 - when the president announced "reciprocal'' taxes of up to 50% on imports from countries with which the United States ran trade deficits and 10% "baseline'' taxes on almost everyone else. He invoked a 1977 law to declare the trade deficit a national emergency that justified his sweeping import taxes. That allowed him to bypass Congress, which traditionally has had authority over taxes, including tariffs - all of which is now being challenged in court. Trump retreated temporarily after his Liberation Day announcement triggered a rout in financial markets and suspended the reciprocal tariffs for 90 days to give countries a chance to negotiate. Eventually, some of them did, caving to Trump's demands to pay what four months ago would have seemed unthinkably high tariffs for the privilege of continuing to sell into the vast American market. The United Kingdom agreed to 10% tariffs on its exports to the United States - up from 1.3% before Trump amped up his trade war with the world. The US demanded concessions even though it had run a trade surplus, not a deficit, with the UK for 19 straight years. The European Union and Japan accepted U.S. tariffs of 15%. Those are much higher than the low single-digit rates they paid last year - but lower than the tariffs he was threatening (30% on the EU and 25% on Japan). Also cutting deals with Trump and agreeing to hefty tariffs were Pakistan, South Korea, Vietnam, Indonesia and the Philippines. Even countries that saw their tariffs lowered from April without reaching a deal are still paying much higher tariffs than before Trump took office. Angola's tariff, for instance, dropped to 15% from 32% in April, but in 2022 it was less than 1.5%. And while Trump administration cut Taiwan's tariff to 20% from 32% in April, the pain will still be felt. "20% from the beginning has not been our goal, we hope that in further negotiations we will get a more beneficial and more reasonable tax rate,' Taiwan's president Lai Ching-te told reporters in Taipei Friday. Trump also agreed to reduce the tariff on the tiny southern African kingdom of Lesotho to 15% from the 50% he'd announced in April, but the damage may already have been done there. Countries that didn't knuckle under - and those that found other ways to incur Trump's wrath - got hit harder. Even some of the poor were not spared. Laos' annual economic output comes to $2,100 per person and Algeria's $5,600 - versus America's $75,000. Nonetheless, Laos got rocked with a 40% tariff and Algeria with a 30% levy. Trump slammed Brazil with a 50% import tax largely because he didn't like the way it was treating former Brazilian President Jair Bolsonaro, who is facing trial for trying to lose his electoral defeat in 2022. Never mind that the U.S. has exported more to Brazil than it's imported every year since 2007. Trump's decision to plaster a 35% tariff on longstanding U.S. ally Canada was partly designed to threaten Ottawa for saying it would recognize a Palestinian state. Trump is a staunch supporter of Israeli Prime Minister Benjamin Netanyahu. Switzerland was clobbered with a 39% import tax - even higher than the 31% Trump originally announced on April 2. "The Swiss probably wish that they had camped in Washington'' to make a deal, said Wolff, now senior fellow at the Peterson Institute for International Economics. "They're clearly not at all happy.'' Fortunes may change if Trump's tariffs are upended in court. Five American businesses and 12 states are suing the president, arguing that his Liberation Day tariffs exceeded his authority under the 1977 law. In May, the U.S. Court of International Trade , a specialized court in New York, agreed and blocked the tariffs, although the government was allowed to continue collecting them while its appeal wend its way through the legal system, and may likely end up at the U.S. Supreme Court. In a hearing Thursday, the judges on the U.S. Court of Appeals for the Federal Circuit sounded skeptical about Trump's justifications for the tariffs. "If (the tariffs) get struck down, then maybe Brazil's a winner and not a loser,'' Appleton said. Trump portrays his tariffs as a tax on foreign countries. But they are actually paid by import companies in the U.S. who try to pass along the cost to their customers via higher prices. True, tariffs can hurt other countries by forcing their exporters to cut prices and sacrifice profits - or risk losing market share in the United States. But economists at Goldman Sachs estimate that overseas exporters have absorbed just one-fifth of the rising costs from tariffs, while Americans and U.S. businesses have picked up the most of the tab. Walmart, Procter & Gamble, Ford, Best Buy, Adidas, Nike, Mattel and Stanley Black & Decker, have all hiked prices due to U.S. tariffs. "This is a consumption tax, so it disproportionately affects those who have lower incomes,'' Appleton said. "Sneakers, knapsacks ... your appliances are going to go up. Your TV and electronics are going to go up. Your video game devices, consoles are going to up because none of those are made in America.'' Trump's trade war has pushed the average U.S. tariff from 2.5% at the start of 2025 to 18.3% now, the highest since 1934, according to the Budget Lab at Yale University. And that will impose a $2,400 cost on the average household, the lab estimates. "The US consumer's a big loser,″ Wolff said. -- AP Economics Writer Christopher Rugaber contributed to this story.
