Japan's industrial production rose 3.8 percent on the month in March for the first rise in three months on resumed auto output, coming in just above the median forecast of a 3.5 percent gain and partially recovering from the effects of suspended vehicle output over a safety test scandal that had also hurt other sectors. It followed an unexpected decline of a downwardly revised 0.6 percent in February and a 6.7 percent plunge in January.

Of the 15 industries, nine posted increases from the previous month and six marked decreases. The overall increase was led by the auto sector (passenger cars and trucks), production machinery for flat-panel displays and semiconductors as well as electronics parts and devices. Production was lower in the iron and steel and non-ferrous metals category and chemicals.

From a year earlier, factory output posted a fifth straight drop, down 6.7 percent, largely in line with a consensus call of a 6.6 percent decline, after a downwardly revised 3.9 percent fall in the prior month.

The METI's survey of producers indicated that output is expected to slip back 1.0 percent in April before a solid 4.4 percent rebound in May.

The auto output suspension took its toll on industrial production for the first quarter, which slumped 5.4 percent on quarter, and shipments of capital goods excluding transport equipment -- a key indicator of business investment in equipment in GDP data -- fell 2.1 percent in January-March. Preliminary first quarter GDP, due on May 16, is forecast by economists to post a slight contraction, hit by suspended vehicle production. Business investment is expected to slip after a strong rebound and private consumption remains sluggish amid elevated costs for daily necessities.

The ministry maintained its assessment after downgrading it for the first time in six months for the January data, saying industrial output"has weakened while taking one step forward and one step back." The METI repeated that it will keep a close watch on the effects of global economic growth and resumed automobile production.

Econoday's Relative Performance Index stands at minus 14, below zero, which indicates the Japanese economy is performing slightly worse than expected. Excluding the impact of inflation, the RPI ss at plus 11.

Japan's industrial production is forecast to rebound 3.5 percent on the month in March for the first rise in three months after unexpectedly falling a downwardly revised 0.6 percent in February and plunging 6.7 percent in January, partially recovering from the effects of suspended vehicle output over a safety test scandal. From a year earlier, factory output is expected to post a fifth straight drop, down 6.6 percent, after a downwardly revised 3.9 percent fall in the prior month. The METI's survey of producers released last month indicated that output is expected to rebound 4.5 percent in March and rise a further 3.3 percent in April.

Industrial Production measures the physical output of the nation's factories, mines and utilities. Factories manufacture various products, and the industrial production indexes have been prepared as a comprehensive indicator of wide-ranging production activities for such products and are regarded as some of the most important among economic indexes.

Investors want to keep their finger on the pulse of the economy because it usually dictates how various types of investments will perform. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers more subdued growth that won't lead to inflationary pressures. By tracking economic data such as industrial production, investors will know what the economic backdrop is for these markets and their portfolios.

Industrial production provides key industry data for this export-dependent economy. The data are issued twice a month-a preliminary estimate at the end of the month for the preceding month and a revised estimate about two weeks later. All products, whether sold domestically or abroad, are included in the calculation of industrial production. Industrial production is highly sensitive to the business cycle and can often predict future changes in employment, earnings and income. For these reasons industrial production is considered a reliable leading indicator that conveys information about the overall health of the economy. This report has a big influence on market behavior. In any given month, one can see whether capital goods or consumer goods are growing more rapidly. Are manufacturers still producing construction supplies and other materials? This detailed report shows which sectors of the economy are growing and which are not.