Japan’s output falls for second month due to impact from quake and Iran war

Japan’s industrial production fell for a second month, signaling mounting pressure on manufacturers as the Middle East conflict drags on.

Output decreased 1.7% in August compared with July, the industry ministry reported Wednesday. Economists had expected a 1.3% gain. Production increased 3.4% from a year earlier, compared with a consensus estimate of a 6.8% advance.

Industries posting declines in output included cars, general-purpose and industrial machinery and petroleum. Production of transport equipment excluding cars increased.

Separate data from the ministry showed retail sales rose 2.7% in August from a year earlier.

Wednesday’s data suggest Japanese manufacturers may be feeling the impact of prolonged uncertainty surrounding the U.S. conflict with Iran. With the Strait of Hormuz remaining closed, elevated oil prices and supply-chain disruptions have weighed on Japanese companies. With a deal to reopen the waterway remaining elusive, the U.S. aims to release up to 40 million barrels from the nation’s emergency reserve.

The relatively weak yen has supported Japan’s exporters in general, offsetting some of the Mideast impact, while strong global AI-related demand has bolstered the tech industry in particular, and output is expected to remain solid in the coming months. The ministry forecast that industrial production would advance 3.2% in September and 3.1% in October. Japan’s manufacturing PMI gauge registered 54.1 in September and has stayed expansionary, or above 50, every month this year.

Worldwide investment in data centers to meet growing AI needs is projected to reach $31.6 trillion through 2050, according to a report released by PricewaterhouseCoopers earlier this month.