–Japan Q2 Industrial Output Revised Up To +1.5% Q/Q From +1.4%

TOKYO (MNI) – Japanese industrial production fell 1.1% in June from
May, revised up from a preliminary 1.5% fall but still posting the first
m/m drop in four months, as passenger cars, semiconductors and steel led
the decline, data from the Ministry of Economy, Trade and Industry
released Thursday showed.

The decline in June is seen as a temporary blip, due in part to
distorted seasonal adjustments caused by the Lehman shock of 2008, and
does not contradict expectations that the economy will remain on a
recovery track.

Both government officials and private-sector economists expect
production of cars, electronics and other goods to stay on an uptrend on
a quarterly basis after a temporary dip in June and July.

Bank of Japan Governor Masaaki Shirakawa also told reporters on
Tuesday that the BOJ believes industrial output is still growing,
judging from what it hears directly from companies, adding that it is
difficult to accurately adjust distortions in the data caused by the
Lehman shock.

Under the current formula for industrial output, figures in the
winter and spring tend to have an upward bias while those in the summer
will appear more depressed than what output really is.

Unlike seasonal adjustments to quarterly GDP that are made to
recent past quarters every time the data is released (for both
preliminary and revised series), industrial production figures are
adjusted for seasonal factors only once a year, in April, for the past
12 months.

METI reported last month its 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 a revised 1.5% from the
previous quarter, up slightly from a preliminary 1.4% gain and 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 the July-September quarter is now estimated to rise a
revised 0.4% (preliminary +0.2%) from the previous quarter, based on the
above forecasts and assuming that output in September will be unchanged.

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 17.3% y/y, revised up from the initial reading of +17.0% but
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 a revised 21.0% (preliminary +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 revised +0.2% m/m (preliminary -0.2%) vs. May -1.7%
m/m, the first m/m rise in two months. The rise was led by increases in
general machinery, foods and tobacco (beverages) as well as transport
equipment.

Inventories: June unrevised +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 revised -1.7% m/m
(preliminary -1.4%) vs. May +4.8%, the first m/m drop in three months.

The capacity utilization index: June -2.1% m/m at a seasonally
adjusted 89.4 (vs. 100 = 2005 average) vs. May +0.8%.

tokyo@marketnews.com
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