Japan's Factory Output Declines Amid Impact of Trump Tariffs on Manufacturers

Japan's factory output fell more than expected in March, dragged down by the country's key auto industry, as US President Donald Trump's tariff policies rattle manufacturers and a wide range of industries around the world.

Ryosei Akazawa, Japan's trade negotiator, will travel to the United States on Wednesday to meet with counterparts for a second round of tariff negotiations.

Industrial output fell 1.1 percent in March from the previous month's 2.3 percent increase, falling short of a median market forecast of 0.4 percent, according to Ministry of Economy, Trade, and Industries (METI) data.

While the ministry's survey of manufacturers predicts that seasonally adjusted output will rise 1.3 percent in April and 3.9 percent in May, a METI official cautioned that optimism is premature.

"The environment surrounding production remains highly uncertain," the official stated.

The METI reported that motor vehicle production fell 5.9 percent in March compared to the previous month. Specifically, regular passenger car output fell 4.1% in March due to lower exports, while small vehicle production fell 23.2% due to auto part supply disruption.

Trump imposed a 25% tariff on car and truck imports and announced a 24% tariff on all Japanese goods, which was later reduced to 10% for 90 days. The massive US tariffs are rattling Japan's industrial supply chains, particularly for automobiles, the country's largest export.

Last year, Japan exported ¥21 trillion (US$147.45 billion) worth of goods to the United States, with automobiles accounting for approximately 28% of the total.

The METI official stated that manufacturers expressed concerns about US tariffs, but the government is unaware of any changes in their production plans.

Nonetheless, Japanese companies are concerned that Trump's protectionist policies will cause a broader global slowdown.

Top Japanese construction machinery maker Komatsu forecast a 27% drop in operating profit this fiscal year due to a stronger yen and new US tariffs, which will cost more than US$650 million.

Separate data showed that Japanese retail sales increased 3.1 percent in March from the previous year, slightly less than the median market forecast of 3.5 percent.