uploads/2015/11/Japan4.png

Japan’s Industrial Production Will Likely Be Gloomy in December

By

Updated

Industrial production rose in October

With a rise in production and shipments, Japan industrial production rose by 1.4% in October—compared to a rise of 1.1% in September 2015. Although it was higher than the previous month on a monthly basis, it was below the consensus estimate of 1.9%. The production and shipment index rose by 1.4% and 2.1%, respectively, in October—compared to September 2015. In contrast, the inventories and inventories ratio fell by 1.9% and 3.0%, respectively.

The industries that contributed towards the rise include machinery, transport equipment, electronic parts, and devices. The iShares MSCI Japan (EWJ) fell by 0.32% and the WisdomTree Japan Hedged Equity ETF (DXJ) rose by 1.6% over the past month as of November 27.

Article continues below advertisement

Industrial production fell by 1.4% on a YoY basis in October

On an annual basis, Japan’s industrial production fell by 1.4% in October. Barring inventories that rose by 0.2% in October, the production, shipment, and inventories ratio fell by 1.4%, 0.8%, and 0.5%, respectively, from a year ago. Stocks like Sony (SNE), Mitsubishi UFJ Financial Group (MTU), and Honda (HMC) rose by 19.6%, 13.7%, 7.0%, respectively. In contrast, Toyota (TM) fell by 0.46%, respectively, from a year ago as of November 27, 2015.

Production growth in November

In November 2015, manufacturers expected production to rise by 0.2%. They expect production to fall by 0.9% in December. The industries like information and communication equipment, electrical machinery, and electronic parts were supposed to increase the production in November. The decrease in the production was due to the fall in transport equipment, electronic parts and devices, and general purpose machinery in December.
A rise in the industrial production is in line with Japan’s flash manufacturing PMI (purchasing managers’ index). It saw the sharpest rise in November.

Japan’s Prime Minister Shinzo Abe pledged to increase the size of Japan’s economy from around $4.1 trillion to $5.0 trillion in the latest fiscal year. However, with gloominess surrounding the production in December, the pledge might get extended.

Pessimism surrounds Japan’s industrial output in December. In the next part of this series, we’ll discuss how consumer confidence is trending in the Eurozone.

Advertisement

More From Market Realist