Japanese steel production drops after tax hike

Steel production in Japan fell 2.5 percent in April from a year earlier, as demand slowed after the introduction of a sales tax earlier in the month. Japan's Department of Commerce is forecasting a 3.8 percent decline in the April-June quarter as a whole.

At the same time, steel production in Japan for the first quarter ended March 31, increased by 4 percent. This is due to the highest demand in construction in 6 years, and even Prime Minister Shinzo Abe has revived the nation's economy with investments in infrastructure and a softening of the monetary system.

However, investors are now watching the impact of the sales tax, which took effect on April 1. The Japan Iron and Steel Federation said crude steel output in April will not reach 8.94 million tonnes. The fall in demand was outlined for cars and housing under the influence of a surge in sales tax. Labor shortages are also holding back construction demand.

The researcher noted that production of steel I-beams, mainly used for construction, fell 9.0 percent in April from a year earlier, marking the first time in 23 months. Export demand is also sagging due to declining steel prices overseas and political uncertainty in Thailand.

Japanese steel officials said they expect to see a pickup in domestic demand in the July-September quarter, driven by government stimulus measures. Non-seasonally adjusted steel production could decline 8.0 percent from March.