MNI BRIEF: Japan's Dec Industrial Production Dips, BOJ Eyes Q1

Bank of Japan officials are vigilant against risks to a recovery in industrial production in the first quarter of 2023 as both exports and production will be under pressure due to a slowing global economy, with industrial production dipping in December.

Japan's industrial output fell 0.1% m/m in December for the first drop in two months following a 0.2% rise in November, according to data from the Ministry of Economy, Trade and Industry released on Tuesday.

The decrease was caused by weaker production of general-purpose and business oriented machinery, iron, steel and nonferrous metals, as well as electrical machinery. Motor vehicles production posted the first rise in two months, rising 0.6% in December following a fall of 0.8% in November, showing automobile makers were suffering from the shortage of semiconductors that BOJ officials expected.

The focus is whether bank officials will maintain the view that exports and production are expected to remain on an uptrend with the effects of supply-side constrains waning and with support from high levels of order backlogs for automobiles and capital goods. The risk that bank officials are worried is that the slowdowns in overseas economies intensify or the timing of their pick-up is delayed significantly, exports of automobiles and capital goods may decline rapidly due to cancellations of those orders.

Based on its survey of manufacturers, METE projected that industrial production would be flat on month in January (revised up from a decline of 0.6% forecast last months) and rise 4.1% in February. Adjusting the upward bias in output plans, METI forecast production would fall 4.2% on month in January. Based on this assumption, and if March output were flat, production would fall 1.6% on quarter in January-March, the second straight drop following a decline of 3.1% in Q4.