Japan Industrial Output:

 https://mainichi.jp/english/articles/20210630/p2g/00m/0bu/035000c

Article:

TOKYO (Kyodo) -- Japan's industrial output in May fell 5.9 percent from the previous month, down for the first time in three months, as carmakers and other manufacturers cut back on production due to a global chip shortage, government data showed Wednesday.

The seasonally adjusted index of production at factories and mines stood at 94.1 against the 2015 base of 100, the Ministry of Economy, Trade and Industry said in a preliminary report. The result followed an upwardly revised 2.9 percent rise in April.

Ideas:

Manufacturers might have cut back on production because of the chip shortage, but is it possible that they might have been able in the previous months to increase inventory so that if a cutback occurred they wouldn't lost orders or customers. 

In other words are the manufactures able to produce more than they want, expect, or need in case situations occur that they have to cut back.

And or was the shortage something that has been happening for a while, and the best they could do each month was to meet their estimated output and nothing more.

Article:

The 5.9 percent fall was the sharpest drop since a 10.5 percent dive was marked in May last year when the world's third-largest economy was hit hard by the government's first state of emergency over the coronavirus pandemic, declared the previous month.

By industry, the auto sector plunged 19.4 percent from the previous month following a 1.0 percent fall in April. The global shortage of semiconductors used in new cars forced automakers to cut production, a ministry official told reporters.

Ideas:

A resource such as semiconductors, of such great importance, you would think, manufacturers, if possible, would have multiple sources and not just rely on one supplier.

But the next question is how did the semiconductor chip market get into this situation. Was it preventable, weren't they able to produce enough chips to have a backlog of supply in case any scenario like this happened. 

Is this a logistics problem, a supply problem, a pandemic related problem, or suppliers not being able to find the resources needed to produce the chips.

While exports are very important for the Japan economy, they are not the entire economy. So yes, its not good but Japan no longer is just a manufacturing only economy like decades before. 

The Japanese economy is now a fully advanced services economy, so a 19.4 decrease in the auto sector, while an important part of the economy, is not everything in the Japanese economy.

Article:

Output in the electrical machinery and the information and communication electronics equipment sector sank 4.5 percent, as manufacturing of lights for cars and air conditioners was also affected by the semiconductor shortage, according to the official.

Makers of machinery used in production, including chip-making equipment, slid 5.9 percent after a 7.7 percent boost in output in the previous month.

Meanwhile, the overall decline was cushioned partly by a 7.2 percent gain in transportation machinery except for cars, as well as a 2.2 percent increase in chemical products.

Ideas:

Again despite the decrease in output in the above sectors, they are not the entire Japanese economy. Yes its not good but the Japanese economy should be able to maintain some kind of modest growth during the pandemic.

As the above results show, the Japanese economy, like any economy is very complex and made up of a lot of different areas or sectors. While some might be down, some are going to be up. That's just how an economy works, in the pandemics or in normal times.

As with any resource, such as semiconductor chips, do companies have agreements lets say globally, to find other sources of supply. Meaning if a company is running low of a resource can they find ways to get the resource globally.

But the chip shortage being global maybe many companies are having the same challenges and all companies are in the same situation, and unable to find chips sources from other companies.

Article:

The ministry maintained its assessment of industrial output, saying it is "picking up."

Based on a poll of manufacturers, the ministry expects output to rise 9.1 percent in June and decline 1.4 percent in July.

"Recovery in demand for domestic and overseas capital investment is expected to continue," the official said, while warning of further fallout from the chip crunch and the economic impact of the spread of coronavirus variants.

The index of industrial shipments decreased 4.7 percent to 93.1 while that of inventories dropped 1.7 percent to 93.1.

Ideas:

Output may rise in June but why a decrease in July other than the beginning of the Obon season which is the major summer holiday period in Japan, as maybe some companies will take a holiday during this time and some production might be shut down.

Capital investment is always dependent on the sentiment of companies, as do they see the economy improving in the future, or globally. 

And yes, the new virus variants are going to slow down the economy some, again, as the Japanese economy is in a roller coaster situation, meaning up and down as the pandemic continues on with no end in site.

The increase or decrease of inventories can usually mean two things. If there is a continued increase in inventories that might mean demand is not as good as expected and or a company overestimated what demand would be and now they have a lot of inventory just sitting and they overproduced.

The other side of the equation meaning if inventories are low, again they might have underestimated future demand and they can't meet demand. And then the situation now might be there is a shortage of resources to produce something, such as with the semiconductor chips.

Have a nice day and be safe!