TOKYO, Aug 30: Japan’s factory output fell 0.4 per cent in July from a month earlier, marking the second straight month of declines, due to a brief slump in electrical machinery, the government said on Friday.

While Japanese officials wrote off the drop to seasonal factors, economists saw clouds on the horizon for the nation’s export-led recovery.

It’s the second month of declines, but we continue to see a trend toward growth, said Noriyuki Seshino an official with the Ministry of Economy, Trade and Industry, which released the figures.

The biggest contributor to the decline was output of electrical machinery with active LCDs (liquid crystal displays) as the largest factor, he said.

The drop was caused by such factors as a summer holiday lull and the delay of shipments, but the situation is not bad at all.

The preliminary output figure for July followed a 0.2-per cent fall in June, the ministry said.

Richard Jerram, chief economist at ING Barings, said the disappointing output figure could mean the global hi-tech slowdown was hitting Japan again.

I thought that these numbers were probably the most important today and also the most worrying, Jerram said.

For the electric machinery sector, which has basically been the dominant driver behind the cycle, production fell for the second month running and possibly more worrying than that, inventories rose pretty strongly, he said.

Overall industrial shipments in July declined 0.6 per cent and inventories rose 0.6 per cent on the month, the ministry said.

If this is weakening foreign technology demand starting to feed through to an involuntary increase in inventories then it’s rather worringly similar to what was going on at the start of last year, Jerram said.—AFP