September Industrial Production

◆The September indices of industrial production recorded a decline of -1.1% m/m. The METI production forecast survey sees October performance up by +4.7% m/m, and November down by -0.9%.

◆Though industrial production declined in September, it is expected to return to positive performance in October due mostly to performance of capital goods. The growth trend is expected to be maintained in the future. Performance of capital goods is especially notable, with general-purpose, production and business oriented machinery centering on exports of semiconductor manufacturing equipment especially favorable. On the other hand, one automobile manufacturer halted production and shipments at its domestic factories, hence declines in production of transport equipment will be a negative factor bringing down overall performance in the short-term. However, the effects are expected to be limited.

◆Production is expected to experience moderate growth in December 2017 and beyond. As for capital goods, exports are expected to lead the economy and expand centering on semiconductor manufacturing equipment due to the recovery in the global economy. However, caution is required regarding overseas demand due to possible downside risk. If US interest rates undergo a rapid rise in association with the Fed’s exit strategy, this could bring downward pressure on the US economy, while at the same time encouraging capital outflows from the emerging nations.