— METI Forecast Index: Japan June Output +0.4% M/M, July +1.0%
— METI Repeats: Japan Output Continues To Show Upward Move

TOKYO (MNI) – Japanese industrial production fell 0.1% in May from
the previous month after rising 1.3% in April, as transport equipment,
pulp paper and paper products and petroleum and coal products
contributed to the decrease, data from the Ministry of Economy, Trade
and Industry released Tuesday showed.

The seasonally adjusted monthly drop in May came in line with the
consensus forecast for a 0.1% fall.

May’s drop is the first m/m drop in three months, after the gains
of 1.3% in April and 1.2% in March, and the second m/m drop in the past
12 months.

Before the May data, output has gained every month since March
2009 except for a 0.6% fall in February this year.

Production has continued to improve 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 May this year
rose 20.2% y/y following a 25.9% rise in April, recovering 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.

The May month-on-month output drop was led by decreases in large
passenger cars, semiconductor products machinery and flat-panel display
products machinery.

Output is expected to rise in the coming months.

METI’s survey of firms’ forecasts showed that production will rise
by 0.4% in June – an upward revision from the 0.3% rise estimated in
last month’s survey — before rising further by 1.0% in July (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 adopted in June 2009 that: “Industrial Production continues
to show an upward movement.”

April-June industrial production would show a 1.9% rise from the
previous quarter if June figure come out as forecast. It would be a
fifth straight q/q increase following a 7.0% rise in the January-March
period.

Production in the first quarter of 2010 jumped 27.5% from a year
earlier, a reversal from the 4.3% drop in the fourth quarter of 2009 and
the 19.4% fall in the third quarter of 2009.

Other details from the latest data:

Shipments: May -1.7% m/m vs. Apr +1.4%, the first m/m drop in three
months. The drop was led by decreases in transport equipment, general
machinery and petroleum and coal products.

Inventories: May +2.0% m/m vs. Apr +0.6%, marking the second
consecutive m/m rise. The increase in inventories was led by transport
equipment, chemicals and information and communication electronics
equipment.

The inventory-to-shipments ratio: May +4.4% m/m vs. Apr +1.2%, the
second consecutive m/m rise.

tokyo@marketnews.com
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