February Industrial Production

◆The February 2018 indices of industrial production grew by +4.1% m/m in a rebound from the previous month’s performance (-6.8% in January). Growth in the transport equipment industry (which suffered a major decline in January) helped to pull up overall performance. The METI production forecast survey sees March performance up by +0.9%, while April is seen at +5.2%. Meanwhile, the estimated value for March is +0.5% (corrected for production plan bias).

◆In order for the Jan-Mar period to achieve growth, March performance would have to record more than +6.7% m/m in growth, which is a hurdle all too high. Therefore the Jan-Mar period is expected to be in a temporary lull, while April is seen achieving +5.2% in m/m growth. Our outlook has not essentially changed, and we see production continuing favorable performance due to the expanding global economy.

◆Production is expected to experience moderate growth in May 2018 and beyond. As for capital goods, the growth trend seen up till now may weaken, but favorable performance is expected to be maintained due to the expanding global economy. As for domestic capex, favorable corporate business performance and investment in maintenance and repair is expected to provide a boost to overall performance in 2018. However, caution is required regarding overseas demand due to possible downside risk. As for the US, its protectionist policies and measures various countries are taking to deal with it may cause trade friction, leading to stagnation of global trade. Meanwhile, 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.