Japan's industrial output down worse-than-expected 1.3 percent

Japan's factory output fell a worse-than-expected 1.3 percent in August from the previous month for the second straight month of decline amid slowing Chinese demand and the strong yen, official data showed Friday. The fall followed a revised 1.0 percent drop in July, the Ministry of Economy, Trade and Industry said. The reading prompted the ministry to downgrade its overall assessment of production in the world's third-biggest economy, saying, "Industrial production appears to have weakened." It said output was flat in its assessment in July. The August production fall was chiefly due to sluggish output of electronics parts and transport equipments on lower demand in China, where the economy has been weakening, and other countries, according to the ministry. Looking ahead, manufacturers polled by the ministry expect production will further shrink 2.9 percent in September and will be flat in October. Manufacturers are concerned about the impact of the increasing tensions between Japan and China over islands in the East China Sea, which led to Chinese consumer to boycott Japanese products, including cars and construction materials. China is Japan's biggest export market. Massive anti-Japan rallies across China following Japan's Sept 11 nationalization of the disputed islands also forced Japanese companies to close factories in China.