Japan’s factory output weakens

The blog has been following the debate over ‘decoupling’ with some interest. With the US going into a downturn, it is critical to understand whether Asian chemical markets will follow. Until recently, they have been buoyant, allowing US companies to make up for some of the decline in their domestic markets via exports. But I suggested back in December that this would probably not last.

Today’s news from Japan tends to confirms my scepticism. Factory output fell 2% in January. Bloomberg reports this was because ‘a deepening US slump weakened demand for cars and electronics’. Even worse, companies expect output this month to slide a further 2.9%. March may be better, as inventories will have been worked off.

Japanese central bankers can do little to stimulate the economy, with interest rates near zero. Governor Fukui said last week that ‘a deeper slump in the world’s biggest economy (the US) would have adverse effects on the emerging markets that Japanese exporters depend on’. With the US$ weakening as well, markets seem likely to get increasingly tough for Asian chemical companies.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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