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MNI INSIGHT: Auto Output Snags Lead Japan Q3 Factory Gauge Down

TOKYO (MNI)

Japan's industrial production posted the first q/q drop in the third quarter, weighed down by lower production of automobiles caused by supply chain disruptions and October production is likely fall further, MNI understands.

Industrial production fell 3.7% q/q in the third quarter for the first drop in five quarters. The data is also the third straight drop on month of automobile and general-purpose and business oriented machinery production, with September down 28.2% m/m, wider than the -15.2% in August, and also down 40.8% y/y from -5.8% in August.

Supply chain disruptions are likely to ease in November but downward pressure on production is projected to remain in or after November as supply will not catch up with demand immediately, the Bank of Japan views.

INDUSTRIAL PRODUCTION KEY

Industrial output remains a key piece of data to aid BOJ economists assess the outlook, as it reflects both external and domestic demand, with the BOJ keeping the view that industrial production and exports will increase.

But the BOJ on Thursday lowered its assessment, saying "exports and production are expected to decrease temporarily due to supply-side constrains," see: MNI INSIGHT: Lingering Supply Chain Gaps Can Alter BOJ Views.

The timing of any rebound is dependent on recovery from the pandemic in Japan and globally, with the latest views into the first quarter of 2022.

Separately, the government left its output assessment from the previous month, noting "industrial production is marking time" and sees production rising 6.4% (revised down from +6.8%) in October and seen up 5.7% in November.

Adjusting the upward bias in output plans, the forecast production would rise 2.4% m/m in October. Based on this assumption, December is flat, Q4 production would rise 1.1% q/q for the first rise in two quarters.

However, the forecast did not include planned reductions in output Japanese auto makers as the latest survey of production, with next month's data expected to show a downward revision.

MNI Tokyo Bureau | +81 90-2175-0040 | hiroshi.inoue@marketnews.com
MNI Tokyo Bureau | +81 90-2175-0040 | hiroshi.inoue@marketnews.com

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