MNI BRIEF: BOJ Vigilant On Output Outlook Despite Feb Rebound

Bank of Japan officials remain vigilant against weak industrial production in the first quarter of 2023 despite a rebound in February, as both exports and production are pressured by the slowing global economy and shortage of semiconductors.

Japan's industrial output rose 4.5% m/m in February for the first rise in two months following a decline of 5.3% in January, according to data released by the Ministry of Economy, Trade and Industry on Friday. The higher output was driven by increased assembly of motor vehicles, production machinery and electronic parts and devices. Motor vehicles production posted the first gain in two months, rising 15.4% in February following a 10.1% fall in January, despite the shortage of semiconductors.

Based on its survey of manufacturers, METI projected industrial production would rise 2.3% in March (revised up from a forecast 0.7% rise last month) and increase 4.4% in April. Adjusting the upward bias in output plans, METI forecast production would fall 0.3% m/m in March. Based on this assumption, production would fall 2.3% q/q over January-March, the second straight drop following a 4.3% fall in Q4.

The BOJ in January lowered its assessment on industrial production and exports in the wake of weak data, saying they have been more or less flat. The focus is on whether exports and production will gain momentum in or after the second quarter and whether high levels of order backlogs for automobiles and capital goods will be sustained or wane.