Japanese Firms Hit Heavily By Global Supply Constraints

A worldwide parts and chip scarcity is weighing heavily on Japanese industries, with seven out of eight automakers reporting a decline in global output in September. This has cast doubts on the central bank’s assumption that the impact of supply shortages will be brief.

Toyota Motor reported on Thursday that its worldwide output fell 39.1 per cent year on year in September to 512,765 units, the company’s second consecutive month of declines.

On the other hand, the global output of Nissan Motor decreased 27.9 per cent for the third month in a row in September, while Honda Motor’s global output declined 30 per cent for the fourth month in a row, according to figures given by the manufacturers.

A number of suppliers, including Hitachi, are already facing an impact of the cuts in production by auto makers. Hitachi on Wednesday announced a significant reduction in its consolidated operating profit outlook for the current fiscal year, which ends in March 2022.

“The impact of (chips shortages) likely was stronger in the third quarter than in the second quarter,” Hitachi’s chief financial officer Yoshihiko Kawamura told a news conference.

Its operating profit forecast for 2021 was also reduced by the electric equipment maker Canon Inc by 11 billion yen ($97 million) to 272 billion yen as its sales are expected ot be hit because of the rising costs of purchasing component and interruptions at its factories situated in Southeast Asia because of a resurgence of the Covid-19 pandemic.

With Covid-19 infection rates decreasing in many Asian countries, supply limitations will improve in the coming months, predict some analysts.

Toyota anticipates that its worldwide output would rebound to roughly 850,000-900,000 units in November.

However, Japan’s economy could be dealt a severe blow because of the output interruptions as the Japanese economy has significantly depended on exports of goods for countering the sluggish demand and domestic consumption because of the lingering Covid-19 pandemic.

The economic growth forecast for the Japanese economy was cut down by the Bank of Japan in a quarterly report released on Thursday pointing to poor demand and local consumption and supply restrictions.

The Bank however raised its growth forecast for the next fiscal and called the slowdown in exports and output as “temporary.”

Nonetheless, the central bank cautioned that if supply bottlenecks remain longer than projected or the harm they inflict worsens, the economy might “worsen further.”

(Adapted from USNews.com)

Categories: Economy & Finance, Regulations & Legal, Strategy, Sustainability, Uncategorized

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