Download 027- Japan Industrial Production.pmd

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Economic Insight
Japan: Further Decline in Industrial Production
TABLE 1: JAPAN’S INDUSTRIAL PRODUCTION INDEX
September
% mom s.a
-4.1
-8.1
-1.6
-4.6
-4.4
-8.5
0.2
-3.3
Inventories
-0.9
4.8
-1.6
5.9
Inventory Ratio
4.2
11
-2.3
8.7
-5
-12.3
0.3
-9.7
2.4
-13.1
-5.4
-14.2
-12.6
-13.2
-0.7
0.4
Major Production Indices
Electronic Parts
and Devices
Transport
Equipment
Japan’s industrial production had unexpectedly declined
4.1% to 86.5 in September from 90.6 in August, marking
a decrease for three consecutive months. The fall was
larger than the 3.1% decline forecast by economists
surveyed by Dow Jones, Nikkei and Bloomberg. It was
also the largest drop since Japan experienced the March
2011 earthquake.
•
The large decline was mainly contributed by lackluster
demand for passenger cars and transport equipment. The
expiration of government subsidies for energy-efficient
car purchases contributed to weak sales. In particular,
sales for Japanese cars in China declined very significantly
and the demand for car parts manufactured in Japan was
also affected.
•
During the month, Toyota’s sales in China dropped 48.9%
from a year earlier, while Honda recorded a 40.5% decline
in sales. The picture is very much similar across the board,
as Nissan’s China auto sales plunged 35.3%, while Suzuki
experienced 42.5% slide in September compared to the
same period a year ago.
•
On the 30th of October, a few hours after the release of
disappointing industrial production figures, Bank of Japan
(BOJ) increased the size of its asset purchase programme
from ¥80 trillion to ¥91 trillion ($1.14 trillion) that would
be completed by the end of 2013, to spur growth and
confidence in the financial market.
•
BOJ had also announced that an unlimited amount of funds
at a low interest rate would be made available to banks
to stimulate lending to private businesses, while the
overnight policy rate was set to remain at 0-0.01% level.
BOJ had also said that it is committed towards
implementing more monetary easing to prevent the
economy from falling into deflation. (Refer to chart 3)
•
Theoretically, the yen should have fallen after the easing
announcement, but it instead gained to a week high of
$1=¥79.28, from the low of $1=80.31 last Thursday, as
the stimulus figure was well below market expectations
for more aggressive monetary easing. Furthermore, the
status of Japanese yen as a safe haven currency further
undermined the BOJ’s moves to weaken the yen.
•
With Sino-Japanese bilateral relationship at an all-time
low, the strengthening yen, the uncertainties regarding
the Eurozone crisis, and Japan’s sluggish domestic
demand, Japan’s hope remains in the gradual recovery
of the United States’ economy. Going forward,
manufacturers are expecting a 1.5% decline in industrial
production in October, before rebounding 1.6% in
November.
August
Shipments
General Machinery
•
% yoy n.s.a % mom s.a % yoy n.s.a
Production
Source: Japan’s Ministry of Economy, Trade and Industry, s.a: seasonally adjusted, n.s.a: nonseasonally adjusted
CHART 2: PRODUCTION INDEX
120
115
110
105
100
95
90
85
80
General Machinery
31 OCTOBER 2012
2012/027
Electronic Parts and Devices
Transport Equipment
CHART 3: QUARTERLY INFLATION RATE (%)
2.5
2
1.5
1
0.5
0
2001
‐0.5
‐1
‐1.5
‐2
‐2.5
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
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