Japan's industrial production rebounded a seasonally adjusted 2.8 percent on the month in May after falling a downwardly revised 0.9 percent in April, thanks to emerging positive effects of vehicle output that was resumed in March after being suspended for about two months over safety issues.

It was stronger than the median forecast of a 2.0 percent rise and topped the forecasts that ranged from 0.6 percent to 2.5 percent gains. The increase was also led by electric machinery including lighting fixtures and navigation systems for vehicles as well as by general machinery such as conveyors and turbines.

From a year earlier, factory output posted the first increase in seven months, up 0.3 percent, following a downwardly revised 1.8 percent slump in the prior month. It was firmer than the consensus forecast of a 0.1 percent dip.

The METI's survey of producers indicated that output is expected to slip back 6.0 percent in June, led by lower output of production machinery and vehicles, before rising 3.6 percent in July on a rebound in production machinery and a rise in chemicals.

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 plus 15, above zero, which indicates the Japanese economy is performing largely as expected. Excluding the impact of inflation, the RPI is plus 26.

Japan's industrial production is forecast to rebound 2.0 percent on the month in May after falling a downwardly revised 0.9 percent in April, thanks to emerging positive effects of vehicle output that was resumed in March after being suspended for about two months over safety issues. From a year earlier, factory output is expected to post a seventh straight drop, down 0.1 percent, following a downwardly revised 1.8 percent slump in the prior month. The METI's survey of producers indicated that output is expected to post a solid 2.3 percent rise in May before falling a sharp 5.6 percent in June.

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.