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     TOKYO (MNI) - Japan's industrial production posted a third straight
month-on-month drop in January, clouding the Bank of Japan view that industrial
production is on an increasing trend.
     Industrial output is a key piece of data for BOJ economists to assess and
predict the pace of the current modest economic recovery and the outlook for
economic activity as it reflects both external and domestic demand.
     January industrial production fell 3.7% on month in January following a
0.1% fall in December, according to preliminary data released Thursday by the
Ministry of Economy, Trade and Industry (METI).
     January's 3.7% fall was weaker than the MNI median forecast of a 2.6% fall.
     The production drop in January was due mainly to lower output of electrical
machine and information communication equipment, and production machinery.
     The weak data will undermine the BOJ view that industrial production will
likely continue to increase for the time being on the back of the rise in demand
at home and abroad. The BOJ has said production is "projected to continue on a
moderate increasing trend with overseas economies growing firmly on the whole."
     In a statement, METI lowered its outlook from last month, saying that
"production is marking time." The government previously said, "production is
picking up moderately."
     Based on its survey of manufacturers, METI projected that industrial
production would rise 5.0% on month in February (revised up from +2.6% forecast
last month) and fall 1.6% in March.
     Adjusting the upward bias in output plans, METI forecast production would
rise just 0.4% on month in February.
--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
[TOPICS: MAJDS$,MMJBJ$,M$A$$$,M$J$$$]