October 31, 2018 / 12:30 AM / 10 months ago

Japan October industrial output falls as trade friction weighs

TOKYO (Reuters) - Japan’s industrial output fell more than expected in September as a series of typhoons and earthquakes disrupted production and a trade war between the United States and China weighed on exports, clouding the country’s economic outlook.

FILE PHOTO: A man works at a factory at the Keihin industrial zone in Kawasaki, Japan February 28, 2017. REUTERS/Issei Kato

The 1.1 percent decline in output was more than the median estimate for a 0.3 percent decline and follows a 0.2 percent increase in the previous month.

Japan exports a large volumes of electronic parts and equipment to China, which are used to make goods destined for the United States, so Japan’s economic growth could weaken if Washington and Beijing remain at loggerheads over trade.

Output fell in September due to a 2.5 percent decline in production of cars and car parts, data from the trade ministry showed on Wednesday. Production of robots and machines used to make flat panel displays also fell 1.4 percent.

Inventories of electronic parts, which are used in smart phones, jumped 9.6 percent in September, the fastest increase in six months.

Economists have expressed concern that high inventories of electronic parts are a sign of weak demand, which could cause manufacturers of such goods to cut future production.

Manufacturers surveyed by the trade ministry expect output to rise 6.0 percent in October but decline 0.8 percent in November.

These forecasts are in doubt after exports fell in September for the first time since 2016 as shipments to the United States and China declined, likely impeding third quarter economic growth and adding to concerns about the broadening impact of an escalating Sino-U.S. trade war.

U.S. President Donald Trump has long threatened to impose tariffs on all remaining Chinese imports into the United States, which exceed $257 billion, if Beijing fails to meet U.S. demands for sweeping changes to Chinese trade, technology transfer and industrial subsidy policies.

Trump has already imposed tariffs on $250 billion worth of Chinese goods, and China has responded with retaliatory duties on $110 billion worth of U.S. goods.

The Bank of Japan is set to keep monetary policy steady next week and maintain its optimistic view on the economic outlook, even as global trade frictions, growth worries and volatile markets put it further away from achieving its elusive inflation target.

Reporting by Stanley White; Editing by Sam Holmes

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