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Free AccessREPEAT: MNI INSIGHT: BOJ Sees Q1 Output Pickup Despite Jan Dip
Repeats Story Initially Transmitted at 06:34 GMT Feb 28/01:34 EST Feb 28
By Hiroshi Inoue
TOKYO (MNI) - Japan's industrial production fell sharply in January from
the previous month but Bank of Japan officials expect factory output to maintain
the modest pickup trend in the January-March quarter based on solid domestic and
overseas demand, MNI understands.
The index of industrial production posted the first month-on-month drop in
four months in January, slumping 6.6% in to a seasonally adjusted 99.5 (100 in
2010), a 12-month low. This followed a 2.9% rise to 106.5 in December, the
highest in more than nine years.
The January output came in weaker than the MNI median economist forecast of
a 4.2% decrease on month but it still rose 2.7% on year.
--DISTORTED OUTPUT DATA
January output data tends to be distorted by seasonal adjustments and BOJ
economists believe the 6.6% drop was largely caused by this statistical
distortion. Industrial production has been showing month-on-month declines in
most of the odd months since January 2017.
However, BOJ economists do think January output was "a bit too weak," even
considering the distortion, and therefore they will keep a close watch on the
underlying trend.
The decrease in January was led by lower output of passenger cars and
general machinery and electronic devices, as largely expected.
The production of transportation equipment -- which tends to be strongly
affected by seasonal adjustments -- plunged 14.1% on month in January (vs. +6.4%
in December).
However, BOJ economists are somewhat encouraged by a projected rebound in
the output of transport equipment in February, up 13.6% on month before slipping
3.3% in March. The projected February increase was revised up from the 9.8% rise
forecast last month.
BOJ officials analyze the demand for Japanese-made automobiles in the key
U.S. market has lost some steam after sharp gains last year, but at the same
time they expect solid global demand for capital goods used in investment in
equipment to continue in the first quarter, supporting Japanese exports and thus
GDP growth in Q1.
--Q1 SEEN DOWN
Based on its survey of manufacturers, METI projected that industrial
production would rebound 9.0% on month in February (revised up from +5.7%
forecast last month) before falling 2.7% in March.
However, adjusting the upward bias in output plans, METI forecast
production would rise at a slower pace of 4.7% on month in February. Based on
this assumption, industrial production would fall 2.5% on quarter in
January-March, the first drop in eight quarters.
Industrial output is a key piece of data for BOJ economists to assess and
predict the pace of the current modest economic recovery as it reflects both
external and domestic demand.
BOJ economists are keeping a close eye on developments in the output of
automobiles as well as electronic parts and devices, which is influenced by
overseas demand.
In January, the real export index rose 2.1% on month and the real index for
capital goods exports gained 4.0%, according to BOJ data.
By contrast, the METI production data showed that shipments of capital
goods excluding transport equipment fell 5.3% on month in January, marking the
first drop in four months after rising 3.8% in December.
--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: max.sato@marketnews.com
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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.