According to the Ministry of Economy, Trade and Industry (METI), the latest decline followed an upwardly revised 2.4-percent expansion in June.
The ministry's preliminary data for July showed the seasonally adjusted index of production at factories and mines stood at 103.6 against the 2020 base of 100.
The index of industrial shipments fell 2.1 percent to 102.8, while that of inventories rose 0.9 percent to 106.7, rising for the third successive month, METI said.
Overall, in the reporting period, 10 sectors reported a decline in output, including production of machinery, electronic parts and devices.
The government maintained its basic assessment that factory output in Japan is "showing signs of picking up moderately," but downgraded the assessment for industrial production to "fluctuated indecisively."
Based on a poll of manufacturers, METI expects output to grow 2.6 percent in August and 2.4 percent in September.
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