Japan’s industrial production fell 0.5% mm in March 2026, missing market expectations of a 1.1% gain but easing from a 2.0% drop in the previous month, flash data showed. It marked the second straight decline in factory output, as external headwinds continued to weigh on the sector. The downturn came amid rising input costs and supply disruptions linked to the Middle East conflict. Industries that contributed to the decrease were inorganic and organic chemicals (-8.6% vs -3.5% in February), general-purpose and business-oriented machinery (-4.3% vs -0.3%), and petroleum and coal products (-7.7% vs -4.1%). In contrast, production grew for transport equipment, excluding motor vehicles (10.5% vs -7.3%), production machinery (1.3% vs -1.7%), and electronic parts and devices (1.7% vs -3.5%). On an annual basis, output increased 2.3%, picking up from a 0.4% rise in February and marking the fastest pace since June 2025.