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Japan production in March recovers as car production increases

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TOKYO – Japan’s industrial production posted a surprising rise in March as a surge in car production helped keep the economic recovery going from last year’s deep drop in coronavirus.

Increased production will likely ease concerns about the impact the health crisis is having on the manufacturing sector of the world’s third-largest economy, which is recovering thanks to strong foreign demand, especially from China.

Separate data showed that the unemployment rate fell from the previous month in a sign of strength in employment conditions, while Tokyo consumer prices fell unexpectedly in April due to cuts in mobile phone rates by the main operators.

Government data released on Friday showed industrial production grew 2.2% from the previous month in March, driven by a sharp jump in car production and increased production of organic and inorganic chemicals.

The production increase, a reversal of the 1.3% decline in the previous month, was much better than the forecast for a 2.0% decline in a Reuters survey of economists.

“The concern is whether this trend can continue,” said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank.

“It is necessary to pay attention to whether the reduction in demand is putting downward pressure on future production, as a state of emergency has been declared in Tokyo and Osaka.”

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The data showed that manufacturers surveyed by the Ministry of Economy, Trade and Industry (METI) expected production to increase another 8.4% in April, followed by a decrease of 4.3% in May.

Factory output had slumped in February as weaker output in sectors such as cars and electrical machinery outpaced better demand for technology manufacturing equipment that has been a major driver of output.

Japan’s economy is expected to be hit by a third state of emergency for Tokyo, Osaka and two other prefectures convened by the government last week in response to the resurgence of COVID-19 infections.

The measures, which are scheduled to last until May 11, are expected to hit the service sector particularly hard, as households are expected to reduce their travel, leisure and restaurant activities, likely indicating a slowdown in demand. internal.

DIVERGENCE

Japan’s manufacturing activity expanded in April at the fastest pace since early 2018, a separate survey of the private sector showed on Friday, underscoring the tailwind manufacturers have been getting from strong global demand.

The country’s economy has emerged from last year’s deep recession thanks to strong exports, although a slow launch of vaccines and repeated emergency measures requested in response to a resurgence of an infection have affected consumption.

The growing divergence between manufacturers benefiting from the global economic recovery and service sector companies facing lukewarm consumption at home is posing a challenge for policymakers.

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“The divergence will probably continue this year,” Sera said. “At the earliest, it may take until the middle of next year for the economy to recover to pre-coronavirus levels.”

Other official data released on Friday showed that the country’s seasonally adjusted unemployment rate fell to 2.6% in March, beating the median estimate of 2.9%.

The Labor Ministry said the jobs-to-applicants ratio was 1.10 in March, up from 1.09 in the previous month and also above a Reuters poll forecast of 1.09.

Government data on Friday also showed that Tokyo’s consumer price index, which excludes fresh food, fell 0.2% in April due to cuts in mobile phone rates, making the inflation target 2% of the central bank is increasingly out of reach.

(Reporting by Daniel Leussink, Kaori Kaneko, Tetsushi Kajimoto and Kentaro Sugiyama; Editing by Sam Holmes and Ana Nicolaci da Costa)

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