March Industrial Production

◆The March 2015 indices of industrial production fell for the second consecutive month by -0.3% m/m, while at the same time exceeding market consensus (-2.3%) and the previous month’s outlook (-1.4%). Performance was positive overall, confirming that production is now in a growth trend after having hit bottom in August 2014. According to METI’s production forecast survey, production plans for the month of April are expected to see production increases of +2.1% m/m. A minor decline is expected in May at -0.3% m/m, but there is essentially no change in our view that there will be a continuation of the moderate recovery.

◆However, the major factor in improvement seemed to be overseas demand, with domestic demand driven industries exhibiting weak performance. Plus production declines are expected to continue in the area of transport equipment, which tends to have a ripple effect on domestic demand. Our basic scenario sees a continuation of the growth trend for production supported by strong exports, but the question of whether overseas demand, the mainstay for industrial production, can continue its firm undertone on into the future will become increasingly important.