MNI 5 THINGS: Japan July Output Dips on Rains, Weaker Exports

--Japan July Industrial Output -0.1% M/M; MNI Median +0.3% 

--Japan METI Forecast Index: August Output +5.6% M/M, Sep +0.5% 

--Japan METI: Aug Output Fcast Adjusted For Upward Bias +1.2

--Japan Q3 Industrial Output Likely To Post Q/Q Drop; Q2 +1.3% 

--METI Downgrades View: Output Picking Modestly With Soft Spots

     TOKYO (MNI) - Japan's industrial output posted the third straight

month-on-month drop in July on heavy rains, slower exports and U.S. trade

disputes, with a slight drop seen in Q3, preliminary data released Friday by the

Ministry of Economy, Trade and Industry showed, prompting the ministry to

downgrade its view for the first time in six months.

     The key points from the latest data:

     * Industrial production edged down 0.1% on month in June, coming in weaker

than the MNI median economist forecast for +0.3%. It failed to recovery a sharp

2.1% drop in June and a slight 0.2% fall in May.

     * The July decrease was led by drops in output of passenger cars,

production machinery and steel. Heavy rains that hit southwestern Japan caused a

parts supply shortage and a distribution network breakdown, leading to a decline

in transport equipment and production machinery. Car exports to the U.S. and

Europe also slumped. Exports of steel products to the U.S. also slowed in light

of a higher import duty levied by the Trump administration.

     * "Until recently, demand for machinery used for capital investment and

passenger cars was leading industrial production, but now there are

uncertainties over these key categories," a METI official said.

     * Based on its survey of manufacturers, METI projected that industrial

production would rise 5.6% on month in August (revised up from +3.8% forecast

last month) and gain 0.5% in September. Adjusting the upward bias in output

plans, METI forecast production would rise at a slower pace of 1.2% on month in

August.

     * If factory output rises 1.2% in August and 0.5% in September, as

forecast, it would slip 0.4% on quarter in July-September, the first q/q drop in

two quarters after +1.3% in Q2 and -1.3% in Q1. "It is unlikely to rise from the

first quarter," the official said.

     * METI downgraded its assessment for the first time in six months, saying,

"While production is picking up moderately, there are signs of weakness in some

areas." Previously, it simply said output was picking up moderately.

--MNI Beijing Bureau; tel: +86 (10) 8532-5998; email: flora.guo@marketnews.com

--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: max.sato@marketnews.com

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