Japan Factory Output Slumps, Shocking Markets With Reversal

Japan’s preliminary industrial production fell 2.6% month-on-month, reversing sharply from a 1.5% gain previously. The swing represents a 4.1 percentage-point deterioration, underscoring a clear downturn in manufacturing momentum.

The outcome was weaker than analysts’ expected 2.0% decline, signaling a deeper-than-anticipated loss of output that is likely to pressure cyclical and export-oriented stocks, particularly in autos, electronics, and machinery. Equity investors may price in softer near-term earnings for manufacturers and suppliers, while expectations for a more cautious Bank of Japan stance support defensives such as utilities and domestic demand names. Market impact is likely to be driven initially by sentiment, with any reassessment of policy expectations shaping medium-term positioning.