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Japan's Q2 Capacity Utilization Rises to 102.9, with AI Demand and Semiconductor Exports Leading Manufacturing Recovery

By AI Insights

2026-05-20

Trend analysis based on the updated indicator. View the Indicator→

Japan's manufacturing momentum is ushering in the dawn of recovery. According to the latest data, Japan's seasonally adjusted capacity utilization in the second quarter of 2025 (April) rose to 102.9%, a significant increase of 1.3 percentage points from 101.6% in the first quarter (March). This data not only puts an end to some market concerns about the slowdown in Japan's industrial production but also establishes the trend of a gradual rebound in corporate utilization rates driven by external demand.

Behind the overall rebound in capacity utilization, the performance of various industries shows polarization. In terms of details, the demand for semiconductors and electronic components led by AI and data centers remains at a high level, becoming the key main force driving up overall utilization; in contrast, traditional petrochemicals and some domestic demand-oriented manufacturing industries face challenges due to rising costs. This indicates that the data recovery this time is highly dependent on the pull of technology exports and specific key supply chains.

Exploring the main cause of this data rebound, it primarily benefits from the global expansion cycle of the technology industry. A recent economic activity report by the Bank of Japan (BOJ) pointed out that although the automobile industry was previously affected by the delayed effects of production cuts by some automakers, domestic and overseas demand for AI-related servers and electronic components is exceptionally strong. In addition, some Asian supply chains have pulled in orders ahead of schedule in response to potential trade tariff barriers, further pushing up the capacity utilization rate of Japan's technology products.

Looking ahead, in the short term (1-2 months), with the continued momentum in semiconductor exports and AI applications, Japan's capacity utilization is expected to remain robust, and the high utilization rates of tech giants will provide downside support. However, in the medium term (3-6 months), the market still needs to be alert to potential headwinds: first, geopolitical conflicts in the Middle East may drive up the costs of imported energy such as crude oil, squeezing corporate profits and impacting petrochemical production; second, if Japan's domestic inflationary pressure leads to continued weakness in domestic demand, it will make the economy overly reliant on a single export engine, increasing the uncertainty of the recovery.

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