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Japan's March industrial output falls 3.7% on month

Nippon Steel Corp.'s Kimitsu plant. (Kyodo)

TOKYO (Kyodo) -- Japan's industrial output fell to the lowest level in more than seven years in March as the coronavirus pandemic disrupted activity at factories and ate into domestic and overseas demand, government data showed Thursday.

    The seasonally adjusted index of production at factories and mines fell 3.7 percent from the previous month to 95.8 against the 2015 base of 100, the weakest reading since January 2013, the Ministry of Economy, Trade and Industry said in a preliminary report.

    It was the second straight month of decline following a revised 0.3 percent drop in February, prompting the ministry to downgrade its assessment of production from "fluctuates indecisively but has weakened" to "declining."

    By industry, automakers made the biggest contribution to the output index's decline as the spread of the virus forced temporary factory closures and lockdowns in major overseas markets such as the United States and Europe and caused a plunge in demand.

    Production of other items for export including industrial robots and equipment used to manufacture semiconductors was also down, while that of aircraft engine parts and paper products such as diapers was up.

    Based on a poll of manufacturers, output is projected to increase 1.4 percent in April and fall 1.4 percent in May. But a ministry official who briefed reporters warned that these figures are likely too optimistic, considering the ongoing spread of the virus.

    Meanwhile, the March index of industrial shipments dropped 5.0 percent to 94.0, while that of inventories rose 1.9 percent to 106.4.

    "I think we are still only beginning to see the impact of the coronavirus. Inventories are stacking up quickly, and there is strong pressure to adjust for that by backing off production in April," said Takeshi Minami, chief economist at the Norinchukin Research Institute.

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