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Japan Factory Output Slips 0.5% as Hormuz Disruption Hits Petrochemicals

A supply shock at the Strait of Hormuz leaves Japan leaning on a thin inventory buffer, highlighting that interest rates cannot fix a fuel shortage.

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Overview

  • Government data show a 0.5% month-on-month drop in March, the second straight fall and a miss versus a 1.1% rise forecast.
  • Petrochemical and fuel output led the slide, with polyethylene down 27%, polypropylene 15%, gasoline 7.3%, and diesel 14.3%.
  • The drop tracks crude and feedstock shortages tied to an effective shutdown of the Strait of Hormuz, and Japan buys about 95% of its oil from the Middle East.
  • METI said inventories for intermediate chemical goods equal about 1.8 months of supply, which has kept most downstream shipments on schedule for now.
  • Makers in a METI survey expect a 0.7% fall in April before a 2.2% rebound in May, as the Asian Development Bank cut its 2026 growth outlook on energy disruption.