January Industrial Production

◆January 2014 indices of industrial production was up 4.0% m/m, recording its second consecutive month of growth. Growth was especially high this time around, exceeding market consensus (+2.8%) and bringing further affirmation of the growth trend.

◆As for production by industry, eleven out of the total of fifteen industries recorded m/m gains, with production increases seen in a broad range of industries. Of these, transport machinery (+8.0%) and general-purpose/production/business-oriented machinery (+9.6%) won major increases in accordance with business plans and helped to push overall figures up. Last minute demand in anticipation of the upcoming consumption tax hike, as well as attempts on the part of manufacturers to prepare themselves for the reactionary decline expected to occur after the tax hike has gone into effect, were especially notable in the transport machinery industry, as well as the electrical machinery, and info/communications equipment industries.

◆METI’s production forecast survey projects February up 1.3% m/m according to production plans, while March is expected to see a decline at -3.2%. Production should continue its growth trend in the immediate future, but then run into a slowdown a bit further up the road. The increases in production seen in February, as well as the declines expected in March, are thought to be due to last minute demand in anticipation of the upcoming consumption tax hike, as well as attempts on the part of manufacturers to prepare themselves for the reactionary decline expected to occur after the tax hike has gone into effect. We suggest keeping a close eye on developments in the immediate future.