October Industrial Production

◆The October indices of industrial production recorded growth of +0.5% m/m, while shipments declined by -0.5%, resulting in a major increase in inventory at +3.1%. The METI production forecast survey sees November performance up by +2.8% m/m, and December up by +3.5%.

◆Though industrial results fell below market consensus at +1.8% m/m, production is expected to grow in November and December, hence growth will likely be maintained in the future. Meanwhile, one of Japan’s major automobile manufacturer halted production and shipments at its domestic factories, contributing to growth in inventories on overall results.

◆Production is expected to experience moderate growth in January 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.