Japan’s factory production in June logged its sharpest fall since the 2011 earthquake-tsunami disaster, hit largely by drops in cars and industrial machines.

Production fell 3.3 per cent month-on-month after a 0.7 per cent rise in May, the trade and industry ministry said on Wednesday.

It is the worst drop since March 2011, when production dived 16.5 per cent with supply chains disrupted by the natural and nuclear disaster.

The June reading was also much worse than the market’s median forecast of a 1.2 per cent drop.

“Industrial production has weakened,” the ministry said in a monthly statement, downgrading its verdict on production.

The ministry had said in its May report that industrial production “appears to be flat”.

Companies had stepped up production ahead of an April 1 sales tax rise – Japan’s first in 17 years – as shoppers made a last-minute dash to buy staples and big-ticket items such as cars and refrigerators.

Capital Economics economics research consultancy said it saw a mixed outlook for the manufacturing sector.

“Industrial production fell sharply in June, and business surveys suggest that any recovery in coming months is unlikely to be vigorous,” it said in a note to clients.

In the latest report, the ministry said a survey of manufacturing sectors shows they expect to increase production by 2.5 per cent month-on-month in July, and another 1.1 per cent in August.

But Capital Economics warned companies tended to be optimistic when forecasting production.

“Unfortunately, firms’ own forecasts need to be treated with caution: on average, manufacturers have overestimated future monthly changes in output by almost 2 percentage points since 2008,” it said.

Other business surveys, in contrast, suggest “any recovery in production in the coming months will likely be slow”, it said.