MNI BRIEF: Japan Mar Factor Output Posts 1st Drop in 2 Months

Japan's industrial production fell 1.1% m/m in March for the first drop in two months following +2.3% in February due to the lower production of automobiles, although production machinery rose, data released by the Ministry of Economy, Trade and Industry showed on Wednesday.

Production of automobiles fell 5.9% m/m in March for the first drop in three months following +0.2% in February, clouding the outlook for solid demand for automobiles caused by U.S. tariffs.

Production machinery rose 6.9% in March for the second straight rise following +8.3% in February.

Industrial output is a key piece of data for BOJ economists to assess and predict the pace of the current modest economic recovery as it reflects both external and domestic demand.

Based on its survey of manufacturers, METI projected that industrial production would rise 1.3% in April, revised up from +0.1% forecast last month, before increasing 3.9% in May.

Adjusting the upward bias in output plans, METI forecast production would fall 2.5% on month in April.

Based on this assumption and if June output were flat, production would be unchanged q/q in April-June following the drop of 0.7% in Q1 for the first drop in four quarters.

BOJ officials are paying attention to the slowing U.S. economy and its impact on production and exports as a driving force for Japanese exports and production.