Japan’s May factory output rises, but slower than expected as tariff threats loom

[TOKYO] Japanese factory output rose at a slower pace than expected in May, government data showed on Monday, as sweeping US tariffs were threatening to derail the country’s already fragile economic recovery.

Industrial output rose 0.5 per cent in May from the previous month, data from the Ministry of Economy, Trade and Industry (METI) showed, less than a median market forecast for a 3.5 per cent rise.

Manufacturers surveyed by METI expect seasonally adjusted output to rise 0.3 per cent in June and fall 0.7 per cent in July.

Tokyo is scrambling to find ways to get Washington to exempt its automakers from automobile industry-specific tariffs of 25 per cent, which are dealing a heavy blow to the country’s manufacturing sector.

Japan also faces a 24 per cent “reciprocal” tariff rate starting on July 9 unless it can negotiate a deal with Washington.

The hit from US tariffs could derail Japan’s lacklustre economic recovery. Subdued private consumption already caused the world’s fourth-largest economy to shrink in January-March, the first contraction in a year.

The US tariffs also complicate the Bank of Japan’s endeavour to raise still-low interest rates and reduce a balance sheet that has ballooned to roughly the size of Japan’s economy. REUTERS