Japanese Industrial Production Unchanged in September

Japan’s industrial production was unchanged in September from a month earlier, falling short of forecasts, in the latest snapshot of Japan’s economy as the central bank board gathers to consider monetary policy. Retails sales were also unchanged, reflecting sustained weakness in consumer spending.

The industrial output was unchanged in September from the previous month. That compares with the median estimate in a Reuters poll of a 1.0 percent increase and followed a 1.3 percent increase in August, data by the Ministry of Economy, Trade and Industry showed on Monday. On a yearly basis, production gained 0.9 percent - shy of expectations for a 1.9 percent increase following the 4.5 spike in the previous month.

Industries that had increased production were business oriented machinery, transport equipment and chemicals. Industries that had decreased production were communication electronics equipment, electronic parts and devices, and fabricated metals. Shipments were up 1.1 percent on month and down 0.1 percent on year. Industries that had increased shipments were transport equipment, business oriented machinery and electrical machinery. Industries that had decreased shipments were communication electronics equipment, fabricated metals and electronic parts and devices.

Lackluster factory output, along with other data showing weak consumption and falling consumer prices could heighten expectations that the Bank of Japan will yet again push back the timing of its price target.

Economists say output may not pick up much in coming months. The cautious view and other data showing weak consumption and falling consumer prices could heighten expectations that the Bank of Japan will yet again push back the timing of its price target.

Manufacturers surveyed by the ministry expect output to rise 1.1 percent in October and gain 2.1 percent in November, but their forecasts are often overly optimistic, economists say. "I don't expect output to rise significantly for the time being," said Norio Miyagawa, senior economist at Mizuho Securities Co. in Tokyo.

"Looking at the production report, I think GDP will lack strength and post a small gain, which would increase calls for stimulus measures to boost growth.” said Toru Suehiro, senior market economist at Mizuho Securities Co. in Tokyo.

"Domestic demand simply is not strong enough. The BOJ has sent a message that monetary policy is on hold for now. We need more effort from the private sector to increase wages."

The yen declined last week to its lowest level in three months, as the US dollar fed off growing bets the Federal Reserve will raise interest rates this year. The Japanese yen was down around half a percent early Monday.

Analysts are also of the view the BOJ would be in no rush to ease because its new policy framework, which targets interest rates rather than base money, is one better suited for a long-term battle to reach its price goal.

At present, the BOJ projects inflation to reach 2 percent during the fiscal year ending in March 2018.