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Free AccessMNI POLICY: Japan Factory Output Supports BOJ Recovery View
--Japan Q3 Output Rises 8.8%; Q4 Seen Rising 4.9%
Japan's industrial production rose 8.8% q/q in the third quarter for the first rise in two quarters following -16.9% in Q2, giving officials at the Bank of Japan some encouragement, MNI understands.
However, central bank officials maintain their cautious view as businesses also remain cautious about implementing capital investment around the globe, and it is uncertain that demand for automobiles will continue rising after the strong rebound.
Industrial output remains a key piece of data to aid BOJ economists to assess the outlook, as it reflects both external and domestic demand, with the BOJ keeping the view that industrial production and exports have increased.
Industrial production rose 4.0% m/m in September for the fourth straight rise following +1.0% in August, boosted by higher production of automobiles and production machinery.
CAR OUTPUT RISES
Car production rose 10.9% m/m in September, accelerating from a 8.9% gain in August and for the fourth straight rise, indicating that pent-up demand might have peaked. Auto production levels remained weak against a year ago; down 4.5% y/y in September but easing from -19.5% in August. Transport equipment accounts for about 20% of Japan's total output with the auto industry alone accounting for around 3% of Japan's GDP.
Shipments of capital goods excluding transport equipment rose 2.6% m/m in September following a 8.3% fall in August, suggesting many firms are still cautious about implementing capital investment, although demand for research and development remains solid.
Production of electronic parts and devices rose 5.7% m/m in September for a fourth straight rise following the 3.9% gain in August, consistent with export data.
--Q4 SEEN RISING FURTHER
The government left its assessment unchanged from the previous month, noting "industrial production is recovering" and sees production rising 4.5% (revised up from +2.9%) in October before further rising 1.2% in November.
However, adjusting the upward bias in output plans, the forecast production would rise 1.2% m/m in October. Based on this assumption and December is flat, Q4 production would rise 4.9% q/q for the second straight rise following a rise of 8.8% in Q3.
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.