Industrial production in June rose 1.6 percent from the previous month, lifted by a recovery in passenger cars and other transport equipment, government data showed Monday, with analysts predicting output will continue to grow.
The rise in production follows a revised 3.6 percent fall in May, with the seasonally adjusted index of output at factories and mines standing at 101.7 against the base of 100 for 2010, the Ministry of Economy, Trade and Industry said in a preliminary report.
Manufacturers polled in the survey said they expect output to rise 0.8 percent in July and increase 3.6 percent in August.
METI kept unchanged its basic assessment that industrial production shows signs of improving.
The rise in passenger vehicle production was rather the result of a steep fall the previous month — a double-digit decrease in the transport sector due mainly to a holiday period in early May — than anything else, a ministry official said.
The biggest contributor to the 1.6 percent rise in overall production in June was the transport machinery sector, up 4.2 percent, followed by the chemicals sector with a rise of 3.4 percent.
The pace of production increase accelerated in the April-June period, registering a rise of 1.9 percent from the previous three months, which had grown 0.2 percent. It was the fifth consecutive quarterly gain, according to the ministry.
Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities Inc., said the expansion in industrial production is supported by a rise in exports in the manufacturing sector amid global economic recovery and a weaker yen, which makes goods produced in Japan more competitive abroad.
The outlook for U.S. President Donald Trump’s steering of his administration remains extremely unclear, but that shouldn’t be a problem in the short term, Maruyama said.
“From 2017 to 2018, the Trump administration would likely contribute positively to the global economy, including to Japan, by implementing fiscal stimulus policy and tax cuts, which the administration sees as its lifeline,” he said.
In the medium to longer term, however, there are risks, Maruyama said, due to the possibility Trump may take policies negative to the Japanese auto industry to protect domestic manufacturers.
Twelve out of 15 business sectors saw production increase. The electronic parts sector was among those with falling output due to slow production of memory and microcomputer chips.
The index of industrial shipments rose 2.3 percent to 100.5 and that of inventories was down 2.2 percent to 108.9, for the first fall in seven months.
While the drop in inventories index could be a sign that shipments are growing, the same ministry official said some manufacturers are becoming “somewhat too strong” in their production plans.