Japan April factory output rebounds on cars; govt cautiously upgrades view

31, May. 2019

TOKYO, NNA - Industrial production in Japan rebounded in April on higher output of passenger cars for the domestic market and machinery for Asia, prompting the government to revise up its view slightly with a cautious outlook.

The Ministry of Economy, Trade and Industry released preliminary industrial production data on Friday.

Key points:

―― Production in April rose 0.6 percent from the previous month, coming in stronger than the median economist forecast of a 0.2 percent increase, making up for a 0.6 percent drop in March (revised from an initial 0.9 percent decline).

―― In April, automakers raised production as they introduced new models, while machinery makers responded to higher orders from Asian countries for equipment to make flat-screen panels.

―― Output has been trending down in a pattern of ups and downs. The April Index of Industrial Production stood at 102.8, returning to the level seen in February, but it is still at a relatively low level.

―― METI upgraded its view on factory output for the first time in six months, saying it is “fluctuating,” compared to its previous view that it had been “weak.” Only last month, the ministry downgraded its assessment in light of sluggish March data and the official forecast for a continued drop in April.

―― Based on its survey of manufacturers, METI projected industrial production would jump 5.6 percent on month in May (revised up from +3.6 percent forecast last month), led by automobiles, before slipping 4.2 percent in June. Adjusting for the upward bias in output plans, METI forecast production would still rise 1.5 percent in May.

Takeaway:

―― The ministry remains cautious about the outlook, saying production may show wide swings from month to month. “The level of production is still low. It lacks strength,” a ministry official said.

―― Some Japanese manufacturers appear to be delaying capital investment plans in the wake of a slowdown in China and disappointing sales of iPhones, economists said. While U.S. demand for Japanese cars remains healthy, the appetite for semiconductors and chipmaking equipment in China and other Asian economies has waned, along with smartphone demand. In April, Japanese exports to the United States rose 9.6 percent from a year earlier, the seventh straight monthly gain, but shipments to China fell 6.3 percent, the second consecutive monthly decline.