Tokyo, March 15 (Bloomberg) -- Japanese factory usage fell in January,led by transportation and machinery, as waning overseas demandprompted companies to cut production. The operating ratio, which measures how much factory capacitycompanies are using, fell 2 percent, seasonally adjusted, from December,the Ministry of Economy, Trade and Industry said. From a year earlier,factory usage fell 0.2 percent, while capacity dropped 0.9 percent, the24th straight decline. Manufacturers are cutting production because sales to the U.S. and Asiaare withering, while demand at home isn't picking up to fill the gap. Exportvolumes fell for the first time in 20 months in January on falling shipmentsto Japan's major trading partners -- Asia, the U.S. and the EuropeanUnion. ``The production is anticipated to go down, and so, naturally, theoperating ratio is likely to go down, too,'' said Minako Iida, economist atDeutsche Securities Ltd. ``The production is slowing with the deterioratingU.S. economy.'' The government report also contained final figures for industrialproduction, which fell 4.2 percent in January from December, more thanthe initial estimate of a 3.9 percent decline. Carmakers and manufacturers of computer parts accounted for most ofthe decline in January. Economists expect industrial production to post the first quarterly drop inseven quarters in the three months to March 31. Manufacturers carriedthe economy out of Japan's third-longest post-war recession, which endedin April 1999. Shipments, a measure of demand, fell 3.7 percent in January fromDecember. Stockpiles rose 0.4 percent. The inventory ratio, whichmeasures inventories as a proportion of shipments, rose 2.2 percent.