MNI POLICY: BOJ Encouraged By Aug Output Rise But Watching Q3

     TOKYO (MNI) - Bank of Japan officials are somewhat heartened by a rebound

in August industrial production but they are more focused on an estimated

decline in the third quarter to examine the underlying trend.

     The BOJ is likely to maintain the view that industrial production is "on an

uptrend."

     Industrial production rose 0.7% on month in August, coming in weaker than

the MNI median economist forecast of +1.5%, preliminary data released Friday by

the Ministry of Economy, Trade and Industry (METI) showed.

     The first increase in four months was led by higher output of passenger

cars and production machinery, which was partly offset by a decline in the

output of electronic parts and devices.

     The METI maintain the view, saying, "While production is picking up

moderately, there are signs of weakness in some areas." The government last

month downgraded its assessment for the first time in six months.

     Based on METI's forecast that factory output is estimated to rise 2.7% on

month in September and 1.7% in October. Adjusting the upward bias in output

plans, METI forecast production would rise at a slower pace of 0.2% on month in

September.

     If factory output rises 0.2% in September, as forecast, it would slump 1.0%

on quarter in July-September, the first q/q drop in two quarters after +1.3% in

Q2 and -1.3% in Q1.

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com

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

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