Japan Industrial Output: Updated on Oct. 16, 2023.

 Article Source: https://mainichi.jp/english/articles/20230630/p2g/00m/0bu/016000c

Article:

TOKYO (Kyodo) -- Japan's industrial output in May fell 1.6 percent from the previous month for the first decline in four months, dented partly by shortages of semiconductors which are facing supply chain constraints, government data showed Friday.

The seasonally adjusted index of production at factories and mines stood at 103.8 against the 2020 base of 100, the Ministry of Economy, Trade and Industry said in a preliminary report.

Ideas:

The shortage situation, related to supply chain challenges and semiconductor shortages, will probably be around for sometime.

Most likely, globally, there is now real shortage of materials related for semiconductors and each country and each company is looking to find the best possible resources of semiconductors they can get.

The factor index at 103.8 is still relatively good as its still above the 100 base level of 2020. But of course it can always change as businesses go through ups and downs each year.

There is no perfect index and a number of 103.8 is just a number and maybe doesn't tell the real story of what is happening in each factory or business.

Article:

The ministry maintained its basic assessment for the reporting month, saying industrial production was "showing signs of moderately picking up" while forecasting a recovery in June.

Of the 15 industrial sectors the survey covers, output in 12 dropped while production in three rose.

Ideas:

The use of the language, "moderately picking up" might just be the use of positive language as they don't want to say anything negative at this time, as global demand maybe is not so good.

But then again they might not want to sound too positive even though industrial production is good but not very strong just yet.

An economy has many different sectors and the industrial sector has many different parts to it and not all parts of the industrial sector will grow or expand at the same time, as some will grow/expand, some will be not so good in growth and some will decline in growth.

For example just how much was the drop in the 12 sectors compared to the increase in the other 3. As the overall index at 103.8 was still above the 100 baseline level of 2020.

Article:

Among the 12 sectors reporting falling output, motor vehicles plunged 8.9 percent from the previous month, dragged down by passenger cars and auto body parts, among others.

A ministry official explained that some companies had difficulties in procuring a specific type of semiconductor used in braking systems.

Ideas:

Globally, semiconductors are going to be real challenge for the future as companies scramble to find the parts they needs. 

All companies, globally, are having the same challenges with semiconductor parts and even in Germany as a CEO suggest in a BBC article, there will be semiconductor shortages for a while.

Most likely, rare earth minerals, parts of semiconductors are at the level of  a world-wide shortage now and maybe can't be found or replaced as easily as other parts.

Companies have to do a better jobs of finding the needed parts and find better supply chains as needed to ensure they have to have the supplies they need in the future.

Article:

The sector for electrical machinery and information and communication electronics equipment also contributed to the overall decrease with a 4.4 percent decline, affected by weakening overseas demand for automotive lithium-ion batteries.

The three sectors reporting increased output included production machinery, which logged growth of 3.6 percent due mainly to robust demand for chip manufacturing equipment, and transport equipment excluding motor vehicles, which also saw a 3.6 percent rise.

Ideas:

As global demand, for certain products decreases, manufacturers in Japan, like any exporting country, are going to see decreases in specific kinds of products.

Chip manufacturing equipment most likely will continue to be a growing industry or sector as almost all electrical products now use semiconductors.

The challenge will be to find enough semiconductors in the future for all  of the global demand for electrical products.

But then again the shortages and supply chain disruptions might be here to stay for a very long time and never really solved. 

Article:

The index of industrial shipments dropped 0.6 percent to 103.9 for the second straight month of decline, while that of inventories was up 1.5 percent at 105.3.

Based on a poll of manufacturers, the ministry expects output to climb 5.6 percent in June and dip 0.6 percent in July.

The official pointed out the need to closely monitor the effects of parts and materials shortages as well as high prices.

Ideas:
Inventories can be both a positive or negative depending on the situation. For example an increase in inventories might mean there is a lot of manufacturing taking please and or it could be mean inventories are increasing too much as maybe demand is  not as good as expected and or the forecast for certain products was not as good as expected and or overly optimistic and demand just wasn't or is not there.

Polls, while important and needed. can sometimes be off as business conditions changes from month to month and quarter to quarter. 

The challenges of parts and materials shortages are probably here to stay and companies need to prepare in how they are going to manage their challenges in the future. 

No company is probably immune related to the parts shortages and they have to find new sources of supplies and or more efficient supply chains, as needed to meet the needs of the future.

Have a nice day and be safe!