Japan's crude steel output in the fiscal year that starts next April is likely to be flat from this year at around 105 million tonnes, with growing local demand offsetting faltering exports, an industry body said on Wednesday.
That tepid outlook from the Japan Iron and Steel Federation follows a string of weak signals on the country's economy that have raised doubts about government efforts to reignite growth and end decades of deflation.
It also comes as steelmakers around the world grapple with the fallout of massive exports of cheap steel from China, with producers there turning overseas as the local appetite wavers.
"Domestic demand will certainly increase next fiscal year thanks to higher capital expenditure and consumer spending ahead of the planned sales tax hike in 2017, on top of Olympic-related construction demand," Koji Kakigi, chairman of the steel industry body, told a news conference.
Japan plans to raise its sales tax to 10 percent from 8 percent in April 2017. The country is also gearing up to host the Olympics in 2020.
"The problem is overseas demand ... It's difficult to make a forecast now, but we expect a slight drop in steel exports next fiscal year," Kakigi said, without giving further detail.
Kakigi, also president of JFE Steel, a unit of JFE Holdings Inc, said appetite for the country's exports would be hit by increased shipments of Chinese steel.
Japan's crude steel production has been in a downtrend since late last year, pressured by slack consumption of cars and houses after a sales tax hike in April 2014.
Tumbling steel prices in Asia, hit by China's exports and weaker demand for energy-related steel products such as drill pipes because of plunging oil prices, forced steelmakers like Nippon Steel & Sumitomo Metal and JFE Steel to trim output.
Japan's industry ministry has predicted the country's crude steel output would fall 3.7 percent in October-December from a year earlier.