Japan's Industrial Output Falls in March Due to Middle East Supply Disruptions

Japan's government reported on Thursday that the country's industrial output unexpectedly declined in March, primarily due to supply disruptions from the Middle East affecting chemical and fuel product production. According to Jin10, Japan's industrial output fell by 0.5% month-on-month in March, marking the second consecutive month of decline and falling short of market expectations for a 1.1% increase. The decline was mainly attributed to products derived from petroleum, with polyethylene production dropping by 27% and polypropylene by 15% in March. However, Japan's Ministry of Economy, Trade and Industry (METI) stated that the country maintains a 1.8-month supply of these intermediate chemical products, which should largely mitigate the impact on downstream shipments. The data also showed a general decline in domestic fuel production in March, with gasoline production down by 7.3% and diesel by 14.3%. Japan relies on the Middle East for approximately 95% of its crude oil, most of which is transported through the Strait of Hormuz.