– Shipments Also Rebound, Inventories Dip, Reflecting Solid Demand
– METI: Limited Impact of Govt’s Request for Restricted Economic Activity
By Max Sato
(MaceNews) – Japan’s industrial production rebounded in January, marking the first rise in three months, reflecting solid domestic and overseas demand despite the pandemic, preliminary data released Friday by the Ministry of Economy, Trade and Industry showed.
The ministry maintained its view that factory output is “picking up.” But it also repeated its warning about downside risks to domestic and global economic activity posed by a rise in coronavirus cases.
“The effects of the state of emergency issued (by the Japanese government) in January was small while domestic and overseas demand remained on a recovery trend,” the ministry said in a statement.
Prime Minister Yoshihide Suga has extended a state of emergency in Tokyo and some other areas for another month until early March, calling for shorter business hours and urging people to stay home as much as possible.
In trade data released by the Ministry of Finance last week, Japanese exports posted the second straight year-on-year increase in January, reflecting the recent recovery trend in global demand for semiconductors, but the faster pace of increase from December was also due to rush shipments to Asia before the Lunar New Year holidays in February.
Shipments of automobiles, which had led overall exports, have showed, the MOF data showed. Hit by semiconductor shortages, Japanese carmakers have announced they would lower production.
The key points from the data:
* Industrial production rose 4.2% from the previous month in January, coming in slightly firmer than the consensus economist forecast of +4.0%. It was the first month-on-month rise in three months after a 1.0% drop in December (revised up from a preliminary -1.6%) and the largest gain since +8.7% in July 2020. The increase was led by higher production of general machinery (bearings, boiler parts and cameras), electronic parts and devices (integrated circuits) and communications equipment (lithium-ion batteries and base station telecom equipment).
* Production fell m/m between February and May last year, with a steep 9.8% decline in April, and rose between June and October, with an 8.7% jump in July.
* The Index of Industrial Production (100 in the 2015 base year) was at 97.7 in January, which was much higher than the recent bottom of 78.7 in May 2020, but it was still below 99.8 in January 2020, when the pandemic hadn’t had a widespread impact yet.
* From a year earlier, IIP fell 5.3% in January for the 16th straight year-on-year drop, with the pace of decrease accelerating from -2.6% in December. The decline was smaller than -9.0% in September and -13.8% in August.
* Based on its survey of manufacturers, METI projected that industrial production would rise 2.1% on month in February (revised up from -0.3% forecast last month) but fall 6.1% in March. Adjusting the upward bias in output plans, METI forecast production would dip 0.4% in February.
* METI maintained its assessment, saying, “Production is picking up.” The ministry continued urging a close watch on “downside risks to domestic and overseas economic growth posed by the recent spread of infections.”
* In January, shipments rebounded 3.2% on month, the first rise in three months after slipping 1.1% the previous month, while inventories dropped 0.2% after rising 1.1% in December. METI said inventories remained at low levels, which reflected a pickup in demand.
Govt downgrades view: economy picking up but with sectors
Last week, Japan’s government downgraded its overview on the domestic economy for the first time since last April, when the first wave of COVID-19 infections prompted shorter business hours and stay-home lifestyles, according to its monthly report released by the Cabinet Office.
The government said “signs of a pickup remain in place” but added that “there is weakness in some areas,” the first downward revision to its overall assessment in 10 months.
Economic indicators are mixed: Consumer spending is slowing down as the government has extended its request for restricted economic activity for a month until early March, while business investment in equipment is playing catchup in light of a gradual pickup in global demand.
Carmakers and manufacturers of production machinery are increasing or upgrading their capacity, it said, repeating its recent observation. It added that telecom carriers and information service providers are changing their systems and networks more in tune with the fifth-generation technology standard.
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Contact this reporter: max@macenews.com.
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