Japan Factory Output Rises Sharply Below Forecasts In May As Tariff Fears Weigh
Michelle ReidJapan’s factory output grew at a much slower pace than expected in May as weaker external demand, primarily due to U.S. tariffs on automobiles, weighed on industrial activity, government data showed on Monday.
Japan’s factory output grew at a much slower pace than expected in May as weaker external demand, primarily due to U.S. tariffs on automobiles, weighed on industrial activity, government data showed on Monday.
Industrial output rose 0.5% in May compared to a 1.1% drop in the previous month, but sharply missed a median market forecast for a 3.4% rise, data released by the Ministry of Economy, Trade and Industry (METI) showed.
Manufacturers surveyed by the ministry expect seasonally adjusted output to rise 0.3% in June and contract 0.7% in July.
Meanwhile, trade talks between Japan and the U.S. are still ongoing, with Tokyo saying it cannot accept 25% auto tariffs. After six rounds of talks in two months, the sides remain deadlocked on tariffs.
Japan faces both broad and sector-specific tariffs, with general duties set to rise from 10% to 24% on July 9 without a deal, alongside a 25% levy on cars and auto parts and 50% on steel and aluminum.
Today’s figures will be analyzed for their implications on the Bank of Japan’s decisions, especially as policymakers monitor domestic resilience against global economic headwinds and political uncertainties.
While the central bank has signalled readiness to raise rates further, the economic impact of higher U.S. tariffs and cooling inflation prints complicates decisions around the timing of the next rate increase.
