Japan: Production declined by 3.1% in May

EcoFlash

As expected, industrial production declined by around 3% in May. The weakness was related to the tightening of the purchase incentives for green cars and the sluggishness of external demand. By contrast, it is underpinned by the strong demand for construction-related materials. Production is forecast to decline further in Q3.

Industrial production contracted in May by 3.1%. Entrepreneurs had already indicated a substantial fall in production in reaction on the rise in inventories. The inventory ratio, which had been well above normal levels, fell by 3.7%, but remained relatively high.

The weakness was widespread. The largest contribution came from the transport equipment sector. Production fell by 11.1%. This is related to the tightening of the purchase incentives for green cars in April. The production of large passenger cars fell by 17.6%. Also the production of smaller passenger cars declined, as car makers have been anticipating the ending of the scheme next in July.

Foreign trade has also been weighing on production. In May, exports fell by 2.7% in volume (EcoFlash 12-176). Exports have been hampered by the slow growth in world trade. In particular exports to the eurozone have been very sluggish. Moreover, Japanese exporters have been disadvantaged by yen strength.

By contrast, production has been underpinned by the strong demand for construction-related materials. Since February, the production index in the iron and steel sector has been fluctuating around 95, whereas it was close to 90 in Q4 2011.

According to METI’s production forecast survey, manufacturing activity could rebound by 2.4%. Nevertheless, we remain rather pessimistic concerning the outlook for the rest of the year. Largely due to the termination of the purchase incentives for green cars in July, production is forecast to decline by 0.8% q/q in Q3 and to remain flat in Q4.

Published On Fri, Jun 29 2012, 09:05 GMT Previous entries

Raymond Van Der Putten

Follow Follow my activity on FXstreet.com BNP Paribas website

Expert in Japan, Australia, New Zealand, Benelux, Pensions and Long Term Forecasts.

More articles by this author

Also Read

Japan stocks rebound from overnight collapse as yen-sellers resurface
TradeTheNews.com
EUR bounced from 1.2822 to 1.2957
Westpac Institutional Bank
Forex - USD/JPY, NZD/JPY Flows: USD/JPY at day lows as NIkkei loses gains; Fri markets! 100.25
FXMarketAlerts
Morning Report - Volatility reigns, Aussie snaps back
GlobalFX
Dollar and the Lack of Safe Haven Demand
BK Asset Management

Advertisement

Legal disclaimer and risk disclosure

BNP Paribas is regulated by the FSA for the conduct of its designated investment business in the UK and is a member of the London Stock Exchange. The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty, express or implied, is made that such information is accurate or complete and it should not be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other investment. Information and opinions contained in the report are published for the assistance of recipients, but are not to be relied upon as authoritative or taken in substitution for the exercise of judgement by any recipient, they are subject to change without notice and not intended to provide the sole basis of any evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. No BNP Paribas Group Company accepts any liability whatsoever for any direct or consequential loss arising from any use of material contained in this report. All estimates and opinions included in this report constitute our judgements as of the date of this report. BNP Paribas and their affiliates ("collectively "BNP Paribas") may make a market in, or may, as principal or agent, buy or sell securities of the issuers mentioned in this report or derivatives thereon. BNP Paribas may have a financial interest in the issuers mentioned in this report, including a long or short position in their securities, and or options, futures or other derivative instruments based thereon. BNP Paribas, including its officers and employees may serve or have served as an officer, director or in an advisory capacity for any issuer mentioned in this report. BNP Paribas may, from time to time, solicit, perform or have performed investment banking, underwriting or other services (including acting as adviser, manager, underwriter or lender) within the last 12 months for any issuer referred to in this report. BNP Paribas, may to the extent permitted by law, have acted upon or used the information contained herein, or the research or analysis on which it was based, before its publication. BNP Paribas may receive or intend to seek compensation for investment banking services in the next three months from an issuer mentioned in this report. Any issuer mentioned in this report may have been provided with sections of this report prior to its publication in order to verify its factual accuracy. This report was produced by a BNP Paribas Group Company. This report is for the use of intended recipients and may not be reproduced (in whole or in part) or delivered or transmitted to any other person without the prior written consent of BNP Paribas. By accepting this document you agree to be bound by the foregoing limitations. Analyst Certification Each analyst responsible for the preparation of this report certifies that (i) all views expressed in this report accurately reflect the analyst's personal views about any and all of the issuers and securities named in this report, and (ii) no part of the analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed herein. United States: This report is being distributed to US persons by BNP Paribas Securities Corp., or by a subsidiary or affiliate of BNP Paribas that is not registered as a US broker-dealer, to US major institutional investors only. BNP Paribas Securities Corp., a subsidiary of BNP Paribas, is a broker-dealer registered with the Securities and Exchange Commission and is a member of the National Association of Securities Dealers, Inc. BNP Paribas Securities Corp. accepts responsibility for the content of a report prepared by another non-US affiliate only when distributed to US persons by BNP Paribas Securities Corp. United Kingdom: This report has been approved for publication in the United Kingdom by BNP Paribas London Branch, a branch of BNP Paribas whose head office is in Paris, France. BNP Paribas London Branch is regulated by the Financial Services Authority ("FSA") for the conduct of its designated investment business in the United Kingdom and is a member of the London Stock Exchange. This report is prepared for professional investors and is not intended for Private Customers in the United Kingdom as defined in FSA rules and should not be passed on to any such persons. Japan: This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited, Tokyo Branch, or by a subsidiary or affiliate of BNP Paribas not registered as a financial instruments firm in Japan, to certain financial institutions permitted by regulation. BNP Paribas Securities (Japan) Limited, Tokyo Branch, a subsidiary of BNP Paribas, is a financial instruments firm registered according to the Financial Instruments and Exchange Law of Japan and a member of the Japan Securities Dealers Association. BNP Paribas Securities (Japan) Limited, Tokyo Branch accepts responsibility for the content of a report prepared by another non-Japan affiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited, Tokyo Branch. Hong Kong: This report is being distributed in Hong Kong by BNP Paribas Hong Kong Branch, a branch of BNP Paribas whose head office is in Paris, France. BNP Paribas Hong Kong Branch is regulated as a Licensed Bank by the Hong Kong Monetary Authority and is deemed as a Registered Institution by the Securities and Futures Commission for the conduct of Advising on Securities [Regulated Activity Type 4] under the Securities and Futures Ordinance Transitional Arrangements. Singapore: This report is being distributed in Singapore by BNP Paribas Singapore Branch, a branch of BNP Paribas whose head office is in Paris, France. BNP Paribas Singapore is a licensed bank regulated by the Monetary Authority of Singapore is exempted from holding the required licenses to conduct regulated activities and provide financial advisory services under the Securities and Futures Act and the Financial Advisors Act. © BNP Paribas (2011). All rights reserved.