REPEAT: MNI: Japan Dec Factory Output Drops, BOJ Focused On Q1

Repeats Story Initially Transmitted at 00:27 GMT Jan 31/19:27 EST Jan 30

     TOKYO (MNI) - Japan's industrial production posted the second straight

month-on-month drop in December, leaving Bank of Japan officials to re-examine

their view that production is returning to a moderate recovery path.

     BOJ officials were encouraged as production rebounded in the fourth

quarter, although as expected not not fully offsetting the drop seen in Q3, as

firms cannot increase production beyond their operating ratio, already running

near full capacity.

     Production in December fell 0.1% from November, according to preliminary

data released Thursday by the Ministry of Economy, Trade and Industry (METI).

However, December's -0.1% was a better than the MNI median forecast of -0.3%.

     --FIRST QUARTER FOCUS

     BOJ officials think the weaker production data for December and November

(-1.0%) is somewhat a reaction to the strong October data, which rose 2.9% m/m

and overall Q4 data was fairly solid. Fourth quarter production rose 1.9% from

the previous quarter, coming after a fall of 1.3% in the natural-disaster

impacted Q3.

     After the mixed messages in Q3 and Q4, the BOJ are now focused on how

production evolves in Q1 to examine the underlying trend.

     The drop of production in December was due mainly to lower output of

production machinery and electronic parts/devices. Against that, output of both

motor vehicles and business oriented machinery rose.

     In a statement, METI maintained its outlook from last month, saying that

"production is picking up moderately."

     Based on METI's forecast factory output is seen falling 0.1% m/m in January

and then rise 2.6% in February. Adjusting the upward bias in output plans, METI

forecast production would drop 2.3% on month in January.

--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