December 2016 Industrial Production

◆The December 2016 indices of industrial production grew for the second consecutive month at +0.5% m/m, while at the same time exceeding market consensus at +0.3%. Meanwhile, the December shipping index was down for the first time in four months at -0.3%, with the inventory index growing for the first time in four months at +0.2%. Inventory ratio grew for the first time in three months at +0.9%. While production was up, shipments were down, with inventory growing, indicating that on average, production and shipments are in a growth trend with inventory in a declining trend, bringing a bright spot to the outlook for the future.

◆The METI production forecast survey sees growth continuing in the future, with January 2017 performance up by +3.0% m/m and February production up by +0.8%. METI’s estimated forecast value for the January 2017 Indices of Industrial Production also indicates growth at +0.5%.

◆Production is expected to experience moderate growth in March 2017 and beyond. Durable consumer goods are expected to maintain a steady undertone, with major household appliances purchased when the ecopoint incentive program was introduced approaching the culmination of their replacement cycle. In addition, the negative effects of preconsumption over demand as a result of last minute demand prior to the increase in consumption tax are gradually falling away. As for overseas demand, recovery is seen continuing for overseas economies, especially the US economy which continues to maintain underlying strength centering on the household sector. Exports are expected to make a gradual comeback.