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Japan's industrial output down 2.1% with weak semiconductor machinery

This photo shows a Mitsubishi Motor Corp. assembly plant. (Kyodo)

TOKYO (Kyodo) -- Japan's industrial output dropped 2.1 percent in June from the previous month, down for the second straight month, hurt by a sharp fall in machinery to produce semiconductors and flat panels, government data showed Tuesday.

The seasonally adjusted index of output at factories and mines stood at 102.2 against the base of 100 for 2010, according to a preliminary report by the Ministry of Economy, Trade and Industry. The result followed a 0.2 percent fall in May.

The second straight monthly fall, the first since December 2015, came as a worrying sign for the strength of output as uncertainty remains over how much of an impact Japan's torrential rains that hit western Japan in July would have on production.

The sector for producing machines for general purposes, production and for business use was the largest contributor to the output index's fall.

That reflects moves among companies to push back production of semiconductor-making machines, according to the ministry.

"As long as it is a temporary fall, we don't have to worry about it too much. That said, the impact of the natural disasters is still unclear," said Toru Suehiro, senior market economist at Mizuho Securities Co.

"If Japan's export growth slows, it will also affect industrial output. So whether the global economy can sustain its growth momentum is also in focus," Suehiro added.

The ministry maintained its basic assessment that industrial production is "picking up slowly."

In the April-June quarter, industrial output gained 1.2 percent from the previous quarter. During the same period, economists say the world's third-largest economy is expected to have logged modest growth after what is seen as a temporary lull in the January-March quarter.

The index of industrial shipments fell 0.2 percent to 101.3 and that of inventories decreased 1.8 percent to 111.5.

Looking ahead, manufacturers polled by the ministry expect output to gain 2.7 percent in July and 3.8 percent in August.

"Output levels remain relatively high," a ministry official said, though adding that the recent piling up of inventory needs to be closely watched.

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