Japan Industrial Output Forecast to Rebound After Sept. Drop

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Rogers Sees More of the Same From BOJ

Japanese industrial production is forecast to rebound this month after a drop in September, while the labor market remained the tightest in decades and household spending fell modestly.

Highlights of the Data
  • Industrial production fell 1.1 percent (forecast -1.6%) in September from August, when it increased by 2 percent.
  • Production is forecast to rise 4.7 percent this month and fall 0.9 percent in November.
  • The unemployment rate remained at 2.8 percent (estimate 2.8 percent).
  • The job-to-applicant ratio was unchanged at 1.52 (estimate 1.53), the highest since the mid-1970s.

Key Takeaways

The latest reading of Japan’s economy comes just a few hours ahead of the conclusion of a Bank of Japan policy meeting. While inflation remains well below the BOJ’s 2 percent target, the central bank has pointed to the labor market and improving outlook gap as factors expected to put further upward pressure on prices. All 43 economists surveyed by Bloomberg expect the BOJ to leave its aggressive monetary easing program unchanged.

Economist Views

  • "The overall trend is one of gradual improvement," said Toru Suehiro, senior market economist at Mizuho Securities Co. "Domestic demand is unlikely to propel fourth-quarter industrial production, but as long as exports keep growing it should remain stable."
  • "The GDP growth rate is likely to slow down in the third quarter to around 1 percent, but that isn’t too bad" given Japan’s low potential growth rate, said Takeshi Minami, chief economist at Norinchukin Research Institute. "The BOJ will probably cite the improving economy and tightening labor market as their key reasons for keeping policy unchanged today, even if they cut their inflation forecast for this fiscal year."

Bloomberg Intelligence

“The data support the view that economic conditions, on balance, remain positive,” Bloomberg Intelligence economist Yuki Masujima wrote. Looking ahead, the job market is likely to continue to remain tight, and household spending may improve as the prices of fresh food and mobile phone services fall, he said.

Other Details

  • Industrial production rose 2.5 percent (forecast +2.0%) in September from a year earlier.
  • Household spending fell 0.3 percent from a year ago (estimate +0.6 percent).

— With assistance by Isaac Aquino, and Toru Fujioka

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