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Japan's factory output records sharpest drop since tsunami disaster

TOKYO--Japan's factory output in June logged its sharpest fall since the 2011 earthquake-tsunami disaster, hit largely by drops in cars and industrial machine production, official data showed Wednesday.

The lackluster figures — which come a day after separate data showed the labor market was tightening as consumer spending ticked up — reflected the mixed picture for the world's number three economy after Tokyo hiked sales taxes in April.

The government and Bank of Japan have both rolled back their economic growth expectations for the fiscal year through March, acknowledging the levy hike has slowed activity.

But the industrial production figures Wednesday came in well below market expectations, suggesting the economy may be on shakier ground than some economists had thought.

The figures showed output fell 3.3 percent month-on-month after a 0.7 percent rise in May.

That marked the worst monthly decline since March 2011, when production dived 16.5 percent with supply chains disrupted by the natural and nuclear disasters.

The June reading was also much worse than median market expectations for a 1.2 percent drop, with the trade ministry downgrading its outlook on production.

Companies had stepped up production ahead of an April 1 sales tax rise — Japan's first in 17 years — as millions of shoppers made a last-minute dash to buy staples and big-ticket items such as cars and refrigerators.

“Industrial production fell sharply in June, and business surveys suggest that any recovery in coming months is unlikely to be vigorous,” Capital Economics said.

A survey of manufacturers released with the data showed firms expect to increase production by 2.5 percent month-on-month in July, and another 1.1 percent in August.

But analysts warned that the survey tends to be optimistic.

“Unfortunately, firms' own forecasts need to be treated with caution: on average, manufacturers have overestimated future monthly changes in output by almost 2 percentage points since 2008,” it said.

Other business surveys, in contrast, suggest “any recovery in production in the coming months will likely be slow.”

On Tuesday, official data showed that Japan's unemployment rate ticked up to 3.7 percent in June, from 3.5 percent in May, which was the lowest in nearly 17 years.

But the ratio of job offers to job seekers was sitting at a 22-year high of 1.10, meaning there were 110 job offers for every 100 people looking for work, with the figures also showing more women entering the workforce.

The rise in both job offers and joblessness suggest more people have started looking for work as they see the labor market improving, leading them to be counted as job-seekers, which in turn pushes up the unemployment rate.

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