Japan June Production Slightly Beats Market Forecast, Rising for Third Straight Month

Economics Research 31 July 2026 | 10:22AM JST

Japan: June Production Slightly Beats Market Forecast, Rising for Third Straight Month; Retail Sales Fall Well Below Market Forecast

BOTTOM LINE: Industrial production rose by +1.3% mom in June (May: +0.1%), Yuriko Tanaka | slightly beating the market forecast (+1.0%) and increasing for the third consecutive Goldman Sachs Japan Co., Ltd. month. Production increased in almost all sectors, including inorganic & organic chemicals and petroleum & coal products, which had been heavily affected by the Middle East disruption. The Ministry of Economy, Trade and Industry’s (METI) bias-adjusted production outlook for July calls for a decline of -0.7% mom, but due to the impact of the Kumamoto earthquake that occurred on July 28, actual production may fall below this level. June retail sales came in well below market forecasts at +0.5% yoy and -4.1% mom. Sales decreased mom across all retail categories.

n Production (mom) 0 (relevance: 4; surprise: 0) n Retail Sales (yoy) -8 (relevance: 2; surprise: -4)

n Production, June: +1.3% mom, vs. GS: +1.0%, BBG consensus: +1.0%, May: +0.1% n Retail sales, June: +0.5% yoy, vs. GS: +2.0%, BBG consensus: +3.1%, May: +5.0% n Retail sales, June: -4.1% mom, vs. GS: -2.5%, BBG consensus: -1.6%, May: +1.7%

June Production Slightly Exceeded Market Forecast, Marking the Third Consecutive Month of Increase

Industrial production rose by +1.3% mom in June (May: +0.1%), slightly beating the market forecast (+1.0%) and increasing for the third consecutive month. Meanwhile, shipments fell for the first time in three months by -0.4% mom (May: +0.5%), and inventories rose for the first time in four months by +2.3%. The government maintained its overall assessment of industrial production as “see-sawing”.

By sector, production increased in 13 of the 15 sectors and declined in 2, with production increasing in almost all sectors. Sharp increases were seen in production machinery, including semiconductor production equipment (+7.6% mom), electrical machinery & information and communication electronics equipment (+5.8%), and general-purpose & business-oriented machinery (+4.7%). In addition, production increased for the second consecutive month for inorganic & organic chemicals (+2.6%) and petroleum & coal products (+4.1%), which had been heavily affected by the Middle East disruption. Production of naphtha, a focus of attention, rose for the

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second consecutive month in June at +3.1% mom, but it is still 13.6% below the February level. Meanwhile, naphtha inventories recovered to -3.1% compared to the February level (at the bottom in April, inventory level was down 22.9% compared to the February level).

The declining sectors in June were electronic parts & devices (-6.3%) and iron & steel and non-ferrous metals (-0.4%).

The Ministry of Economy, Trade and Industry’s (METI) bias-adjusted production outlook for July calls for a decline of -0.7% mom. However, according to various reports, in addition to direct damage from the Kumamoto earthquake that occurred on July 28, many production bases have temporarily suspended operations due to logistical disruptions, pointing to possibility that actual industrial production in July may fall below the planned level.

June Retail Sales Fall Well Below Market Forecast

June retail sales came in well below the market forecast (+3.1%), decelerating sharply to +0.5% yoy from +5.0% in May. On a seasonally adjusted mom basis, sales turned down for the first time since February, falling by -4.1% (May: +1.7%). We think this is partly due to weather factors such as typhoons.

By retail category (mom basis), sales of machinery & equipment, including home appliances, fell by -10.3% mom, offsetting the increases seen in March-May. Sales of textiles, apparel & accessories also turned negative for the first time in three months, falling by -14.2%. Auto retail sales, which were pushed up by special factors in April, declined slightly for the second consecutive month. Other…