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The ministry had earlier estimated the quarter's steel output at about 23.5 million tonnes, which means that output is now set to fall to below the 23-million-tonne mark amid a wide-spread boycott of Japanese goods by Chinese consumers.
Japan's crude steel output registered its biggest annual fall in nine months in October, as a decline in domestic car production and an increase in imports of construction steel reduced demand.
Output fell 6.7% from a year earlier to 8.84 million tonnes, the Japan Iron & Steel Federation said, while imports surged by 20.5% on the month to 764,736 tonnes.
Particularly badly hit by the boycott were carmakers that saw their sales in China slump. They were forced to cut output at home as a result.
The auto sector is the biggest steel consumer for Japan's integrated steelmakers.
Domestic production of passenger cars by Japan's eight leading automakers declined 12.4% on the year in October, with production at Toyota down 16.3%; at Nissan, falling 13%; and at Suzuki, dropping 16.8%.
Meanwhile, production in China sank 48.9%, with Toyota seeing its output plunge 61.1%, Nissan seeing a 44% drop, and Honda a 54.2% fall.
At the same time, car exports from Japan were down 18.7% in the face of the strong yen.
To make matters worse, car sales are also declining.
Japan's domestic sales of new cars, trucks and buses declined 3.3% in November from a year earlier, falling for the third straight month after the government’s buying incentives ended in September.
However, steelmakers say they expect demand from China to improve in the first quarter of 2013, and the recent weakness in the Japanese currency and the strengthening of the Korean won to both help improve the profitability of exports and raise the cost of imports.
Car makers are also saying that the worst effects of the boycott appear to be over, although they still expect to see year-on-year declines in sales.
A Meti official told Steel First much the same.
“I think there will still be some impact (from the boycott) in the next quarter. However, the volume is not yet clear,” he said.
Japan’s territorial spat with China is projected to cost Japanese steelmakers around 550,000 tonnes in lost production in the current quarter, according to its Ministry of Economy, Trade and Industry (Meti).