–METI Survey: Factory Output Likely to Rise Moderately in February, Gain Further in March
–METI Downgrades View: Output Has Weakened While Taking One Step Forward, One Step Back
–METI To Keep Watching Effects of Global Growth, Auto Output Suspension
By Max Sato
(MaceNews) – Japan’s industrial production plunged 7.5% on the month in January, hit by suspended vehicle output over a safety test scandal and in payback for recent gains in other sectors, after rebounding a downwardly revised 1.4 percent in December and falling 0.9 percent in November, preliminary data released Thursday by the Ministry of Economy, Trade and Industry showed. The median forecast was a 7.0% drop.
From a year earlier, factory output posted a third straight drop, down 1.5% (vs. expectations for a 1.8% decline), after marking an unexpected fall of a downwardly revised 1.0 percent in the prior month. The powerful New Year’s Day earthquake in the northwestern region of Hokuriku has also reduced electronic parts supply.
METI’s survey of producers indicated that output is expected to post a modest 0.8% gain in February and rise a further 2.0% in March.
The January slump was caused by suspension of all domestic production by Toyota Motor group firm Daihatsu over a vehicle safety scandal from late December until mid-February, which has had a widespread impact beyond the auto industry. To make matters worse, Toyota said in late January that it would 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, as in last month’s statement.
In its monthly economic report for February released last week, the Japanese government downgraded its overall assessment for the first time in three months, saying while the economy is recovering moderately, consumption has turned weaker amid elevated costs and production has been hit by suspended vehicle output.
Japanese policymakers believe the economy still needs monetary and fiscal policy support to achieve sustainable wage growth and stable 2 percent inflation. Senior Bank of Japan officials have said financial conditions will remain accommodative even after the bank’s board decides to lift the negative short-term interest rate, an action widely expected sometime between April and July.
The key points from the data:
* Industrial production slumped 7.5% on the month in January on a seasonally adjusted basis, coming in weaker than the median economist forecast of a 7.0% drop (forecasts ranged from 10.0% to 3.5% falls). It followed a 1.4% rise (revised down from 1.8%), a 0.9% dip in November and a 1.3% increase in October.
* Of the 15 industries, 14 posted decreases from the previous month and one marked an increase. The decline was led by the auto sector (passenger cars, transmissions and other parts), general and business machinery (steam turbines and test instruments) and electrical machinery and Information and communication electronics equipment (lithium-ion batteries and small electric motors).
* Based on its survey of manufacturers, METI projected that industrial production would rebound 4.8% on the month in February (revised up from a 2.2% rise forecast last month) and rise a further 2.0% in March. Adjusting the upward bias in output plans, METI forecast production would rise just 0.8% in February.
* From a year earlier, the production index fell 1.5% in January after slipping 1.0% (revised down from a 0.7% drop) in December, falling 1.4% in November and rising 1.1% in October. The latest figure was firmer than the median economist forecast of a 1.8% fall (forecasts ranged from 4.2% to 0.1% drops).
* The seasonally adjusted index of industrial production (100 = 2020) stood at 97.6 in January, down sharply from 105.9 in December and hitting the lowest since 97.2 in August 2020. It is still above the recent bottom of 87.6 reached in May 2020 but well below 108.8 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.