MNI BRIEF: Japan Sept Factor Output Hits 1st Rise in 3 Months

Japan’s industrial production rose 2.2% m/m in September, the first increase in three months following August’s 1.5% decline, led by higher output of production machinery, though automobile production growth slowed, data from the Ministry of Economy, Trade and Industry showed Friday.

Automobile output rose 0.9% m/m in September, marking a second consecutive increase but decelerating from August’s 2.5% gain, as front-loaded exports eased. Production machinery output climbed 6.2% after falling 2.1% in August, posting the first rise in two months.

Industrial output is a key indicator for Bank of Japan economists in assessing the strength of the current modest recovery.

METI’s survey of manufacturers showed firms expect production to rise 1.9% in October (revised up from last month’s +1.2% forecast) before falling 0.9% in November. After adjusting for firms’ typical optimism, METI projects production will instead fall 0.5% in October.

Assuming flat output in December, industrial production would contract 0.1% q/q in Q4, marking a second consecutive quarterly decline following a 0.1% drop in Q3.

BOJ officials remain alert to the impact of U.S. tariffs on exports and production and are closely monitoring developments in overseas demand and the U.S. labor market slowdown. (See MNI POLICY: BOJ Sees No Need To Rush Rate Hikes)