November Industrial Production

◆The November indices of industrial production recorded growth of +0.6% m/m, while shipments grew by +2.4% and inventory declined by -1.0%. The METI production forecast survey sees December performance up by +3.4% m/m, and January 2018 down by -4.5%.

◆Industrial production has recently maintained growth due to expanding exports accompanying recovery of the global economy. The government’s economic assessment has been revised upwards from “picking up movement” to “picking up”.

◆The scale of the global market is expanding for semiconductor manufacturing equipment, the leader in growth for the general-purpose, production and business oriented machinery industry. Global demand for semiconductors used in IoT and installed in automobiles is especially strong. Market scale is expected to grow in 2018 by +7.5% y/y to a total of $60.1 billion. While the growth rate is expected to slow somewhat in comparison to 2017 (when it was +35.6% or $55.9 billion), favorable performance is expected to be maintained on into the future.

◆Production is expected to experience moderate growth in February 2018 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.