Japan: June production rises as inventory drawdown reverses

Research evidence excerpt

Japan: June production rises as inventory drawdown reverses

J P M O R G A N Japan Economic Research

31 July 2026

Japan: June production rises as

inventory drawdown reverses

Japan’s June industrial production rose 1.3%m/m sa, beating both our forecast and Economic and Policy Research

consensus expectations (JPM: 0.8%, consensus: 0.7%). The manufacturing sector Takuho Morimoto

continues to hold up despite tighter supply conditions following the energy price (81-3) 6736-6682

shocks, with output rising for a third consecutive month. After a 10.3% q/q saar takuho.morimoto@jpmorgan.com

surge in 1Q, production was essentially flat in 2Q, edging up 0.1% q/q saar. JPMorgan Securities Japan Co., Ltd.

Manufacturers also remain constructive on the near-term outlook: their projections

point to further gains in July and August. Together with the recent pickup in PMI

manufacturing output, this suggests production growth should remain upbeat

through 3Q—although this week’s earthquake may temporarily disrupt activity,

adding near-term downside risk.

Inventories also began to rebuild in June, rising 2.3%m/m sa. Inventory levels had

been declining since late last year, and the energy shocks likely reinforced the

drawdown, pushing inventories back toward pandemic-era lows. The June uptick

may indicate that supply constraints are easing, likely supported by progress in

alternative procurement. If inventory rebuilding continues, it should provide an

additional tailwind for production through 2H.

Within June’s production details, tech-related output was mixed. Electronics

output fell 6.3%m/m sa, led by a 17.0% drop in integrated circuits. Overall, tech

production appears to be losing momentum, remaining broadly flat over the

quarter after a 6.3%q/q saar increase in 1Q.