July 26, 2019 / 5:54 AM / 4 months ago

Japan's June factory output seen falling, retail sales up, but at slower pace: Reuters poll

TOKYO (Reuters) - Japan’s factory output is expected to have slipped in June after rising the previous two months, a Reuters poll showed on Friday, as slowing global growth and the protracted U.S.-China trade war put more pressure on manufacturers worldwide.

FILE PHOTO: An employee works at a beer production line at Japanese brewer Kirin Holdings' factory in Toride, Ibaraki Prefecture, Japan July 14, 2017. REUTERS/Kim Kyung-Hoon/File Photo

Industrial production was forecast to slide 2.0% in June from the previous month, after a 2.3% jump in May and a 0.6% gain in April, the poll of 17 economists showed.

A cooling of overseas demand due to the trade war and rising protectionism have weighed heavily on Japan’s economy this year, hurting exports and pushing manufacturers’ confidence to a three-year low.

“Exports are on a downtrend, which is having a detrimental impact on production activities and manufacturers’ capital spending,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

“Though industrial production had risen for the second straight months in May, inventory has built up and adjustment pressures are considered to be high.”

The most recent data showed Japan’s exports fell for a seventh straight month in June, signaling a deepening of external strains on the world’s third-largest economy ahead of a scheduled nationwide sales tax hike in October that is expected to dent consumption.

The trade ministry will publish the factory output at 8:50 a.m. July 30, Japan time (2350 GMT July 29).

The Bank of Japan (BOJ) is largely expected to keep monetary policy steady at its two-day policy meeting set to end on Tuesday, after a lack of immediate action by its European counterpart this week.

Still, BOJ Governor Haruhiko Kuroda is likely to use his post-meeting briefing to stress his readiness to ramp up stimulus if the economy loses momentum to hit its 2% inflation target, analysts said.

Data on the nation’s retail sector, due a day before the factory output numbers, is projected to show sales edged up 0.2% last month from a month earlier, the poll found, decelerating from a 1.3% increase in May.

Policymakers are hoping a recovery in private consumption will offset pressures from slowing external demand ahead of the planned sales tax hike to 10% from 8% in October.

The poll also showed the jobless rate remained steady at 2.4% in June from the previous month, and the jobs-to-applicants ratio was stable at 1.62.

“The unemployment rate is expected to come in at a low level again in June,” said Kenta Maruyama, economist at Mitsubishi UFJ Research and Consulting.

“Labour supply and demand is still really tight, companies are facing a strong labour shortage, so it will stay at a low level.”

The government will release jobs data at 8:30 a.m. on July 30 (2330 GMT on July 29).

Reporting by Daniel Leussink; Editing by Kim Coghill

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