MNI POLICY: Japan Factory Output Up 0.4% 1Q; Seen Weaker in 2Q

By Hiroshi Inoue

     TOKYO (MNI) - Japan's industrial production posted a first quarterly rise

in three quarters in the three months to March, but output is expected to

contract sharply in Q2 as the impact of the coronavirus intensifies.

     Japan's industrial production rose 0.4% q/q in Q1 following a 3.6% fall in

Q4 2019 and a 1.1% drop in Q3. 

     The Bank of Japan see a deep contraction across Japan's economy in Q2 as

the spread of the global pandemic shuts down swathes of the economy, further

pressured by the slowdown overseas.

     "The production of machinery has continued on a downtrend, affected largely

by a decline in capital goods exports," the Bank noted after the release.

     The industrial production fell 3.7% m/m in March for a second straight

monthly drop, weighed by a drop in the output for automobiles (-5.1%) and

production machinery (-10.2%).

     --WEAK AUTOS, CAPITAL GOODS

     Production for motor vehicle fell 0.4% q/q in the first quarter for a third

straight drop following -6.1% in 4Q and -2.5% 1Q. Transport equipment accounts

for about 20% of the total output and the auto industry accounts for about 3% of

Japan's GDP.

     Shipments of capital goods excluding transport equipment fell 0.5% q/q in

Q1 for a second straight drop following -7.0% in Q4.

     --SOLID IT-RELATED GOODS

     The production of electronic parts and devices rose 5.9% q/q in the first

quarter for the first rise in five quarters, which suggested a pick-up in global

demand before the virus impact hit.

     --Q2 OUTPUT SEEN FALLING

     METI lowered its assessment, saying "industrial production is falling". a

change from the previous assessment that saw output on a weakening trend. The

government sees production rising 1.4% (revised from +6.8%) in April before

falling 1.4% in May, although adjusting the upward bias in output plans, the

forecast production would fall 1.3% m/m.

     Based on this assumption and if June output is flat, 2Q production would

fall 4.7% q/q.

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

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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