Japan Industrial Production Slumps in May, Denting Recovery

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Japan’s industrial output dropped more than forecast in May as production of transport equipment and cars slowed, sapping a recovery in the world’s third-largest economy.

Output fell 2.2 percent from April, when it increased 1.2 percent, the trade ministry said on Monday. Economists had forecast a 0.8 percent decline. Retail sales rose 1.7 percent from the previous month, more than estimated.

The rebound from recession last year is showing signs of losing momentum at a time when global uncertainty is increasing with a slowdown in China and financial turmoil in Greece. JPMorgan Chase & Co. cut its growth estimate for the second quarter last week after weaker-than-expected consumer spending and sluggish trade, saying the economy will slow to a halt.

“Japan’s economic growth will probably slow considerably in the second quarter, reflecting weak exports and production,” said Yuichi Kodama, an economist at Meiji Yasuda Life Insurance Co. “Weakness in exports and sluggish car sales in the domestic market are reflected to the decline in production in May.”

Yen Surge

Japanese stocks fell and the yen spiked as Greece moved to avert the collapse of its financial system after aid talks with its creditors fell apart, raising the risk it could be forced to exit the euro zone. The yen jumped 0.6 percent against the dollar to 123.15 at 11:02 a.m. in Tokyo. The Topix index lost 2 percent.

Growth will slow to 1.4 percent in the second quarter from 3.9 percent in the first three months of the year, according to economists surveyed by Bloomberg. An increase in the sales tax last year triggered a recession and continues to damp consumer spending.

Manufacturers plan to increase production 1.5 percent in June and expand output 0.6 percent in July, according to a government survey included in Monday’s output report.

The biggest contributor to the decline in production in May was passenger cars, followed by automobile parts, according to the trade ministry. Output of transport equipment fell 5.4% in May from the previous month, the biggest decline since Sept. 2012.