— METI Forecast Index: Japan Aug Output +1.6 M/M, Sep +0.2%
— METI Repeats: Japan Output Shows Upward Move But Pausing

TOKYO (MNI) – Japanese industrial production rose a preliminary
0.3% in July after a temporary 1.1% dip in June on higher demand for
general machinery for making flat panel displays and semiconductors as
well as chemicals and printing paper, data from the Ministry of Economy,
Trade and Industry released on Tuesday showed.

The seasonally adjusted monthly gain in July was above the
consensus call of a 0.3% drop and came in higher than the 0.2% m/m drop
predicted for July by the ministry’s forecast survey last month.

METI’s survey of firms’ forecasts showed that production will rise
1.6% m/m in August — revised down from the 2.0% rise estimated in last
month’s survey — before rising further by 0.2% in September (first
estimate).

Based on the latest data and the outlook for the next two months,
the Ministry of Economy, Trade and Industry (METI) repeated its
assessment from last month that: “Industrial Production continues to
show an upward movement although it has been pausing temporarily in
part.”

Output in July-September quarter is now estimated to 0.7% from the
previous quarter, based on the above forecasts.

In April-June industrial production rose 1.5% from the previous
quarter, marking the fifth straight q/q gain but slowing sharply from
+7.0% in January-March and +5.9% in the final quarter of 2009.

Output has gained every month since March 2009 except for the drops
in June (-1.1%) and February (-1.1%) this year. The decline in June is
seen as a temporary blip, due in part to distorted seasonal adjustments
caused by the Lehman shock of 2008.

Production has generally improved from the sharp plunge seen from
late 2008 through early 2009. It rose a record +4.6% m/m in May 2009.

Compared with the year earlier level, production in July this year
rose 14.8% y/y, with the pace of growth continuing to decelerate from
+17.0% in June. It has recovered from the record 38.6% drop in February
2009. The 6.4% rise in December 2009 was the first y/y gain in 15
months.

Other details from the latest data:

Shipments: July -0.1% m/m vs. June +0.2% m/m, the first m/m drop in
two months. The drop was led by decreases in transport equipment,
electronic parts and devices as well as iron and steel.

Inventories: July -0.5% % m/m vs. June +0.7% m/m, marking the first
drop in four months. The decrease in inventories was led by electrical
machinery, transport equipment and general machinery.

The inventory-to-shipments ratio: July +1.5% vs. June -1.7% m/m,
the first rise in two months.

tokyo@marketnews.com
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