JAKARTA - IHS Global Insight Principal Economist Harumi Taguchi provides latest review on Japan’s industrial output. Following is the key points:
Key Points:
- Japan’s index of industrial production (IIP)fell by 2.3% month-on-month (m/m) in May following two consecutive months of increases. Shipments also declined by 2.3% m/m, but inventory and the inventory ratio rose by 0.3% m/m and 1.3% m/m, respectively.
- The weakness in production reflected a shortfall in chemical production (excluding drugs) after a solid increase in the previous month and there were also declines for a broad range of industry groupings. These were partially offset by increases for transport equipment, iron and steel and other industries.
- Despite declines for production, the majority of industry groupings were associated with de-stocking, while the higher inventory partially reflected large increases in electric-powered devices. The stock building which follow declines by factory shutdowns also contributed to inventory increases.
IHS Global Insight Views:
The industry expected production to rise 1.7% in June, and 1.3% in July, on the resumption of operations for automotive factories and the process of destocking. Even so, downside risks remain due to recent yen strengthening and uncertainties about exports dues to the results of the Brexit referendum. Further weakness in demand could lead to further destocking and weigh on maintaining a sustainable increase of production.
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