–METI Survey: Factory Output Likely to Plunge in January, Rise Moderately in February
–METI Keeps View: Output Taking One Step Forward, One Step Back
–METI To Watch Effects of Global Growth, Auto Output Suspension, Drops Risk from High Costs Amid Easing Inflation
By Max Sato
(MaceNews) – Japan’s industrial production rebounded by a solid but lower-than-expected 1.8% on the month in December, led by demand for conveyors, cosmetics and semiconductor-producing equipment and recovering from a 0.9% drop in November, preliminary data released Wednesday by the Ministry of Economy, Trade and Industry showed.
From a year earlier, factory output unexpectedly marked a second consecutive decline, down 0.7%, following a 1.4% dip.
The METI’s survey of producers indicated that output is expected to plunge 10.5% in January before rising a modest 2.2% in February. The downturn is due to suspension of all domestic production by Toyota Motor group firm Daihatsu over a vehicle safety scandal from late December until mid-February, which appears to be having a widespread impact beyond the auto industry. To make matters worse, Toyota said on Jan. 29 that it would briefly suspend shipments of 10 models after its supplier Toyota Industries admitted to cheating on engine testing.
The METI said it will keep a close watch on the effects of global economic growth and suspended automobile production. It dropped the reference to the risk arising from prices as domestic inflation has been easing.
Japanese policymakers believe the economy needs continued monetary and fiscal policy support to achieve sustainable wage growth and stable 2 percent inflation. Bank of Japan Governor Kazuo Ueda told a post-meeting news conference last week that accommodative monetary conditions would remain even after the bank decides to lift its negative overnight interest rate target.
The key points from the data:
* Industrial production rose 1.8% on the month in December on a seasonally adjusted basis, coming in weaker than the median economist forecast of a 2.5% rise (forecasts ranged from 0.4% to 5.0% gains). It followed a decrease of 0.9% in November and increases of 1.3% in October and 0.5% in September.
* Of the 15 industries, 13 posted increases from the previous month and two marked decreases. The increase was led by higher output of general and business machinery (conveyors and test equipment), chemicals (skin lotion and soap) and production machinery (chip-making equipment and food processors). Production of auto tires and carbon fiber was down.
* Production rebounded a seasonally adjusted 1.4% on quarter in the October-December period after falling a revised 1.2% in July-September, rising 1.4% in April-June and dipping 1.8% in January-March.
* Based on its survey of manufacturers, METI projected that industrial production would fall 6.2% on the month in January (revised up from a 7.2% drop forecast last month) and rise 2.2% in February. Adjusting the upward bias in output plans, METI forecast production would plunge 10.5% in January, led by transport equipment, electric and communications equipment (semiconductor testers, heat pumps) and production machinery (chip-making equipment).
* From a year earlier, the production index dipped 0.7% in December after falling 1.4% in November, rising 1.1% in October and falling 4.4% in September. The latest figure was softer than the median economist forecast of a slight 0.1% rise (forecasts ranged from a 2.6% drop to a 2.4% rise).
* Shipments of capital goods excluding transport equipment — a key indicator of business investment in equipment in GDP data – rose a modest 1.3% on quarter in October-December after falling 4.2% in July-September, rebounding 3.8% in April-June and slumping 6.5% in January-March.
* Capital investment posted the second straight quarterly decline in the July-September GDP data, which showed the economy contracted for the first time in four quarters as private inventories plunged, net exports slipped, public works spending slowed, pent-up demand for eating out and traveling waned and firms turned cautious about capex. Preliminary fourth quarter GDP is due on Feb. 15.
* The seasonally adjusted index of industrial production (100 = 2020) stood at 105.9 in December, up from 104.0 in November. It is well above the recent bottom of 87.6 hit in May 2020 but below 108.8 seen in January 2020, when the pandemic hadn’t had a widespread impact yet. The index briefly jumped to 108.8 in April 2021, 109.0 in June 2021 and 107.8 in August 2022.