— Japan Apr-June Industrial Output +1.4% Q/Q Vs Jan-Mar +7.0%
— METI Forecast Index: Japan July Output -0.2% M/M, Aug +2.0%
— METI Repeats: Japan Output Continues To Show Upward Movement

TOKYO (MNI) – Japanese industrial production fell 1.5% in June,
posting the first month-on-month drop in four months, as passenger cars,
semiconductors and chemicals led the decline, data from the Ministry of
Economy, Trade and Industry released Friday showed.

The seasonally adjusted monthly drop in June was much weaker than
the consensus forecast for a flat reading on the month. Moreover, the
drop was in contrast to the 0.4% m/m gain predicted for June by the
ministry’s forecast survey last month.

METI’s survey of firms’ forecasts showed that production will fall
0.2% in July — a sharp downward revision from the 1.0% rise estimated
in last month’s survey — before rising by 2.0% in August (first
estimate).

April-June industrial production rose 1.4% 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 in July-September quarter is now estimated to rise just 0.2%
from the previous quarter, based on the above forecasts and assuming
September will be flat.

Based on the latest data and the outlook for the next two months,
the Ministry of Economy, Trade and Industry (METI) repeated its
assessment adopted in June 2009 that: “Industrial Production continues
to show an upward movement.”

The m/m fall in June was the first since -0.6% in February.
Production was already slowing to a 0.1% gain in May from increases by
1.3% in April and 1.2% in March.

Output has gained every month since March 2009 except for the drops
in June and February this year.

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 last
year.

Compared with the year earlier level, production in June this year
rose 17.0% y/y, slowing from +20.4% in May. 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.

Production in April-June rose 20.9% from a year earlier, also
decelerating from +27.5% in January-March. It was the second consecutive
quarterly gain after -4.3% in the fourth quarter of 2009 and -19.4% in
the third quarter of 2009.

Other details from the latest data:

Shipments: June -0.2% m/m vs. May -1.7% m/m, the second consecutive
m/m drop. The drop was led by decreases in iron and steel, electronic
parts and devices and chemicals.

Inventories: June +0.7% m/m vs. May +2.0%, marking the third
consecutive m/m rise. The increase in inventories was led by information
and communication electronics equipment, chemicals and electrical
machinery.

The inventory-to-shipments ratio: June -1.4% m/m vs. May +4.8%, the
first m/m drop in three months.

tokyo@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4833 **

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