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MNI POLICY: Weak Japan Factory Output Clouds BOJ Recovery View

--Japan Nov Output Unchanged M/M; Q4 Seen Rising 6.3%

TOKYO (MNI)

Japan's monthly industrial production was unchanged in November after a 4.0% increase in October, a result which clouds the Bank of Japan's view that industrial production has positive momentum, MNI understands.

Production of machinery and general-purpose and business oriented machinery rose but production for motor vehicles, which has boosted exports and production, posted the first drop in six months.

Bank officials maintain a cautious view as businesses also remain cautious about implementing capital investment, and because of expectations that demand for automobiles will slow after recent pent-up demand runs its course.

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 on Thursday that industrial production and exports are increasing.

AUTO OUTPUT DROPS

Motor vehicle production fell 4.7% m/m in November for the first drop in six months following +6.8% in October, indicating pent-up demand may have peaked.

Auto production fell 2.7% y/y in November for the first drop in two months following +4.2% in October, the first y/y rise in 13 months.

Transport equipment accounts for about 20% of Japan's total output with the auto industry alone accounting for about 3% of Japan's GDP.

Shipments of capital goods excluding transport equipment rose 2.6% m/m in November but slowed from a 13.4% rise in October, suggesting demand for capital investment remained sluggish.

Q4 SEEN RISING FURTHER

The government left its assessment unchanged from the previous month, noting "industrial production is recovering" and it sees production falling 1.1% (revised up from -2.4%) in December before rising 7.1% in January.

Adjusting for the upward bias in output plans, however, forecast production would fall 2.3% m/m in December. Based on this assumption, Q4 production would rise 6.3% q/q for the second straight rise following Q3's 8.7% rise.

Bank officials see January's forecast of +7.1% will be revised lower.

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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