Japan's Economic Indicator
March Industrial Production

Production declines by -2.1%, but growth expected in April

April 28, 2017

  • Kazuma Maeda
  • Shunsuke Kobayashi


◆The March indices of industrial production declined for the first time in two months by -2.1% m/m, while falling considerably below market consensus (-0.8%). Meanwhile, the March shipping index was down for the first time in two months at -1.1%, with the inventory index growing for the fourth consecutive month at +1.6%, and inventory ratio growing for the first time in two months at +0.5%.

◆Although results fell considerably below market consensus, the realization rate for METI’s production forecast in March was +0.6%, but since the decline in production did not fall below the March outlook, there is no reason to be overly pessimistic regarding these results. All in all, production remains in a growth trend, and major growth is expected in April.

◆The METI production forecast survey sees April performance up by +8.9% m/m, and then down again by -3.7% in May, but April production gains are expected to be major. METI’s estimated forecast value for the April Indices of Industrial Production indicates growth of +5.3%.

◆Production is expected to experience moderate growth in June 2017 and beyond. While capital goods are expected to experience a reactionary decline, construction goods are expected to maintain favorable performance. 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. As for overseas demand, exports to the US appear to be taking a breather from their previous growth trend, but exports to the EU and Asia are expected to maintain favorable performance, bringing upward pressure on production.

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