December 2012 Industrial Production

◆In the Preliminary Report for December 2012 (Ministry of Economy, Trade and Industry [METI]), industrial production increased for the first time in two months (up 2.5% m/m). However, falling short of the market consensus (up 4.1%), the result is somewhat unfavorable. Nevertheless, a wide range of industries saw production advances and anticipate further increases going forward, evidencing signs of bottoming as a whole. Meanwhile, reflecting an increase in shipments (up 4.4%) and a decline in inventories (down 1.1%), the inventory ratio declined (improved) for the third consecutive month (down 0.6%).

◆The METI survey projects overall production to increase 2.6% m/m in January 2013, and to further advance 2.3% in February for the third monthly gain in a row. With regard to January, while the general machinery and electrical machinery industries anticipate setbacks from surges in December, the transportation equipment, chemical, and electronic component/device industries are likely to boost overall production. As for February, only the electronic component/device industry anticipates a production cut, auguring well for improvements in production in general.

◆Accompanied by recoveries in overseas economies, which will likely gain momentum centering on China, ASEAN, and other Asian trading partners, export volume, which moves in tandem with production, began to show signs of bottoming. Combined with a recent shift to a weaker yen, this likely led to a bottoming of export shipments in Oct-Dec 2012, to be followed by a probable turnaround thereafter. Thus, production is likely to gain momentum, accompanied by gains in exports.