Japan’s factory output fell more than expected in March, dragged down by its key auto sector, as U.S. President Donald Trump’s tariff policy unnerved global manufacturers and a wide range of industries.
Japan’s trade negotiator Yoshiaki Akasawa will travel to the United States on Wednesday for a second round of tariff talks with his American counterpart.
Industrial output fell 1.1% in March from a 2.3% increase in the previous month, according to the Ministry of Economy, Trade and Industry, missing the median market forecast of a 0.4% decline.
Although manufacturers surveyed by the ministry expected seasonally adjusted output to rise 1.3% in April and 3.9% in May, a METI official warned that it was too early to be optimistic.
“The production environment remains highly uncertain,” the official said.
Japan’s auto output fell 5.9% from the previous month in March, the Ministry of Economy, Trade and Industry said. Specifically, regular passenger car production fell 4.1% in March due to a drop in exports, while small car production fell 23.2% due to disruptions in auto parts supply.
Trump imposed a 25% tariff on imported cars and trucks and announced a 24% tariff on all Japanese goods, though the latter was later cut to 10% for 90 days. The massive U.S. tariffs are hitting Japan’s industrial supply chain, especially cars, the country’s largest export.
Last year, Japan exported 21 trillion yen ($147.45 billion) worth of goods to the United States, with cars accounting for about 28% of the total.
Japan’s Ministry of Economy, Trade and Industry officials said manufacturers have expressed concerns about U.S. tariffs, but the government is not aware of any changes to their production plans.
However, Japanese companies are worried that Trump’s protectionist policies will trigger a broader global economic slowdown.
Japan’s top construction machinery maker Komatsu on Monday forecast a 27% drop in operating profit and losses of more than $650 million this fiscal year due to the strong yen and the impact of new U.S. tariffs.
Separate data showed that Japan’s retail sales rose 3.1% in March from a year earlier, slightly below market expectations of 3.5%.
($1 = 142.4200 yen)
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