Industrial output rose 0.5 percent in December from November, lifted by robust production growth in transport equipment, government data showed Tuesday amid hopes for continued recovery.
The government maintained its basic assessment, saying industrial production shows signs of improving.
The index of output at factories and mines stood at 100.4 against the 2010 base of 100, the Ministry of Economy, Trade and Industry said in a preliminary report.
Industrial output rose for the second straight month following a 1.5 percent gain in November when the government upgraded its basic assessment for the first time since August.
Boosted by increased output of passenger cars and auto parts, the transport equipment sector was the largest contributor to the index in December with a 2 percent increase.
The information and communication electronics sector registered a 10.7 percent drop in the month.
“We see output making a full-fledged recovery to levels before the raising of the consumption tax (in April 2014),” a ministry official said.
In December, a variety of sectors from chemicals and electronic devices to iron and steel gained, bringing the total number of categories in the positive to 12 out of 15.
In 2016, industrial output fell 0.2 percent from a year earlier to 97.6, even after a strong recovery in the latter half of the year. It marked the second consecutive yearly drop.
Analysts say that the inauguration of U.S. President Donald Trump has raised hopes for economic growth as he has pledged increased infrastructure spending and tax cuts, but uncertainty remains over the specifics of his economic and trade policies.
“We expect industrial output to continue recovering moderately although there is uncertainty about Mr. Trump’s policies,” said Yuichiro Nagai, an economist at Barclays Securities Japan Ltd.
The president pulled the United States from the 12-country Trans-Pacific Partnership free trade pact which involves Japan. He also accused Japan of trade practices in the automobile sector that are “not fair” to U.S. companies.
Manufacturers polled in the survey said they expect output to rise 3 percent in January and 0.8 percent in February.
The index of industrial shipments fell 0.3 percent to 99.0, while that of inventories rose 0.2 percent to 107.1.