Japan’s automakers are on the brink of massively cutting back production by 15% and it’s crushing the country’s industrial production numbers.
August industrial production numbers fell to negative 0.3% when they were expected to grow 1.1%.
Photo: Societe Generale
But why are Japanese automakers making these drastic cuts? The end of government subsidies, of course:
From Societe Generale (emphasis ours):
Car makers are expecting a sharp slowdown in domestic car sales due to the expiry of government incentive in mid September. Export of vehicles have also become sluggish in the recent months. On seasonally adjusted terms, vehicle exports has fallen from annualized 6.3 million units at the recent peak of April to 5.4 million units as of August.
So a decline in demand in export markets is also having an impact. Might have something to do with Japanese goods becoming less competitive in foreign markets due to the increase in the value of the yen.
Since one year ago, the yen has strengthened significantly against the dollar, even though Japan has tried to intervene in currency markets to weaken its currency. That might help to explain the negative export outlook for the country.
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