Japanese companies made fewer autos and less machinery and steel in July than in June, the fifth decrease in six months, as orders slowed at home and in Asia.
Industrial output fell 0.8% in July, the Ministry of International Trade and Industry said. That was worse than the 0.2% decline forecast by economists polled by Bloomberg News and well below the 0.1% increase expected by the government. It follows a 1.7% rise in June.
From the same month a year earlier, production slipped 9.3%. Economists expect companies to trim output through September as they sell off inventories. Exports to the U.S. and Europe, where sales are strong, aren't enough to counter weak demand in Asia, where several economies--including Japan's--are in recession.
"Japan's economy is so weak that even exports backed by a weaker yen have failed to stop production from falling," said Koichi Nakamura, a spokesman for Kawasaki Steel Corp.
Steel output fell for the eighth straight month in July, according to industry figures released earlier this month. Japan's steelmakers expect production to reach its lowest level in 27 years in the 12 months ending March 31, 1999.
Nippon Steel Corp., Mitsubishi Motors Corp., Hitachi, and other exporters to Asia don't expect sales in the region to improve this year. Combined with sluggish spending on autos, homes and machinery at home, production won't fully recover until next year, economists said.
MITI said production will fall 0.4% in August from July and rise 2.5% in September from August. The ministry continued to hold its view that production is on a "downward trend" and inventories are at "high levels."
Economists don't expect production to rise in the July-September period, and they see output slumping 5.7% for all of 1998.
In July, manufacturers' inventories fell 0.8% from June, the fourth decline in the last five months.
Makers of autos, machinery and refiners shed the most inventories. Inventories grew at electronics makers and precision machinery makers.
The inventories are the result of a slide in sales that followed tax increases in April last year and have been compounded by tumbling exports of cars, electronics and machinery to Asia, Japan's largest overseas market.