Japan Economy Improvement:

 https://mainichi.jp/english/articles/20201030/p2g/00m/0bu/040000c

Article:

TOKYO (Kyodo) -- Japan's industrial output rose 4.0 percent in September from the previous month for the fourth straight month of increase, propelled by the auto sector's continued recovery from the impact of the novel coronavirus pandemic, government data showed Friday.

The seasonally adjusted index of production at factories and mines stood at 91.6 against the 2015 base of 100, the Ministry of Economy, Trade and Industry said in a preliminary report.

The result followed a downwardly revised 1.0 percent increase in August.

The ministry retained its assessment, saying industrial output is "picking up."

"Demand for manufacturing has been recovering as economic activities have resumed, with businesses also planning strong output in October," a ministry official said.

But it will still take time for the output index to return to the pre-coronavirus reading of 95.8 in March, with the spread of the virus ongoing, the official added.

Based on a poll of manufacturers, the ministry expects output to increase 4.5 percent in October and 1.2 percent in November.

Ideas:

No doubt the Japanese economy and especially the manufacturing sector will continue to improve over time.

The output index might not reach the pre-pandemic level anytime soon because of potential supply chain challenges.

As demand in the US and China continue to recover Japan's automakers will begin to see higher production levels compare to the spring and early summer.

The services sector of course is way behind the manufacturing sector as people/customers/consumers are still hesitant to go like they did before the pandemic.

Article:

Production in the auto industry gained 10.9 percent in September, remaining the biggest contributor to the index's rise as carmakers saw a recovery in demand both in Japan and abroad.

Manufacturers of production machinery, including chip-making devices and excavation machines, advanced 11.1 percent, while makers of electrical machinery and information and communication electronics equipment saw a 4.8 percent rise.

However, makers of general-purpose and business-oriented machinery, including parts for boilers and cranes for transport, saw a 7.0 percent decline.

Private-sector economists said output posted a recovery in the reporting month thanks to a strong rebound in car exports to the United States, but the level remains far off the pre-pandemic mark of 99.8 in January.

"Going forward, companies are expected to resume capital investments in areas such as information technology and robotics that have been postponed due to the pandemic," said Takuji Aida, chief Japan economist at Societe Generale Securities Japan Ltd.

A pick-up of such spending by the high-tech sector will contribute to a rise in the industrial production index, Aida said.

According to the ministry, the index of industrial shipments climbed 3.8 percent to 90.4, while that of inventories fell 0.3 percent to 97.7 percent.

Ideas:

The rebound might not reach the pre-pandemic levels for some time because of challenges  with supply chains. 

While it hasn't been reported exactly yet, in the large US ports there are shortages of workers for unloading the large container ships. 

Most likely the situation might be similar in China.

Capital investments too may take some time to recover too.

The biggest challenges related to all of the production sectors is global supply chains which are not at 100 percent. It might take most of 2020 for global supply chains to fully recover.

So what does that have to do with Japan and its manufacturing sector. Supply chain affects both imports and exports in Japan, and it affects supply parts that companies need from global suppliers and it affect Japanese companies that supply parts overseas.

Have a nice day and be safe!