Japans Factory Output Substantially Weakened
Factory output in Japan fell by 15.3%, due to the recent earthquake and tsunami, the biggest ever decline in production in the country, BBC News reports. The previous record was an 8.6% fall in February 2009 in the wake of the global financial crisis. Following the figures, the Bank of Japan left its interest rates unchanged in a bid to boost growth. The bank has kept the cost of borrowing at a historic low between zero to 0.1% as the country struggles to recover.
The biggest impact of the twin disasters has been on Japan’s infrastructure and supply chain. That has resulted in Japanese manufacturers being hit by a shortage of parts and key components. There has also been a shortfall in electricity supply in some parts due to the damage caused to power stations by the quake and tsunami.
The combination of those two factors has seen production suspended or curbed at factories of some of Japan’s biggest manufacturers.
While the damage caused by the quake and tsunami to Japan’s economy and infrastructure has been widespread, the country’s automakers have been among the hardest hit, as car manufacturers do not carry a huge inventory of parts.
The industry relies heavily on the efficient functioning of its supply chain to ensure that parts are delivered just-in-time to be used on the assembly lines, which in turn has become an issue with the supply line disruptions. Toyota Motors and Honda have reported that their output fell by 63% in March, while Mazda’s production declined by 54%. ◆