TOKYO (Reuters) – Japan’s industrial output in January is forecast to have fallen at the fastest pace in a year as exports to China tumble due to a bruising trade war with the United States.
Growth in retail sales is expected to slow only slightly in January while the jobless rate is forecast to remain unchanged, a sign domestic demand is holding up at the start of the year.
Weak industrial production would raise concerns that Japan’s economic growth will slow as companies curb output due to a sharp drop in demand from China for heavy equipment.
“Exports of semiconductor manufacturing equipment and telecommunications gear is weakening, and the focus is on China,” said Asuka Sakamoto, economist at Mizuho Research Institute.
“We expect further declines in Japan’s industrial output.”
The United States and China are haggling over details of agreements to end their trade war just one week before a Washington-imposed deadline for a deal expires and triggers higher U.S. tariffs.
Tit-for-tat tariffs between the United States and China, the world’s two largest economies, have already slowed international trade.
Japan is at risk because many of its manufacturers focus on making heavy equipment, electronics, and car parts for other manufacturers of finished goods in China.
Industrial output is forecast to have fallen 2.5 percent in January from the previous month, according to the median estimate of 16 economists in a Reuters poll.
That would mark the third consecutive month of contraction and the biggest decline since January 2018.
Companies surveyed for industrial production will also give their forecasts for output for February and March, which will be closely watched to determine the extent of the damage from the trade war.
Retail sales are forecast to have risen 1.1 percent year-on-year in January, which would be a tad slower than a 1.3 percent annual increase in the previous month.
The trade ministry will release industrial output and retail sales data at 8:50 a.m. Japan time on Thursday, Feb. 28 (2350 GMT, Feb. 27).
Separate data is expected to show Japan’s jobless rate held steady at 2.4 percent in January and the jobs-applicants ratio remained unchanged at 1.63, according to the Reuters poll.
The ministry of internal affairs will release the jobs data at 8:30 a.m. Japan time on Friday, March 1 (2350 GMT, Feb. 28).
Japan’s exports posted their biggest decline in more than two years as China-bound shipments tumbled, fuelling concerns about slowing global demand, data this week showed.
The decline in exports came after a key gauge of Japanese capital spending showed overseas orders for machinery fell the most in more than a decade in December, and business sentiment soured to a two-year low.
Japan’s policymakers are growing more concerned about the outlook for growth if the United States and China do not resolve their differences over trade.
(Reporting by Stanley White; Editing by Sam Holmes)