Japan's industrial production posted its first drop in three months in November, down 2.3% on the month, after increases of 2.8% (revised down from 3.0%) in October and 1.6% in September that followed a 3.3% slump in August. The smaller-than-expected decrease (consensus was -3.5%) was led by production machinery for semiconductors and flat-screen panels as well as vehicles (passenger cars and trucks) after recent gains.

The Ministry of Economy, Trade and Industry said 11 out of the 15 industries showed declines while three marked increases and one was flat.

METI's survey of producers indicated that output would dip 0.3% in December despite an expected rise in production and general machinery before rebounding 1.3% in January on vehicles and semiconductors.

From a year earlier, factory output fell 2.8% (consensus was -4.0%) for the first drop in two months following a 1.4% gain (revised down from +1.6%) in October and a 2.6% fall in September.

The ministry maintained its assessment, saying industrial output is"taking one step forward and one step back." It said it will keep a close watch on how global economic growth evolves.

Japan's industrial production is forecast to post its first drop in three months in November, down 3.5% on the month, after increases of 2.8% (revised down from 3.0%) in October and 1.6% in September that followed a 3.3% slump in August. The monthly survey by the Ministry of Economy, Trade and Industry released last month indicated that output would fall 4.1% in November and dip a further 0.5% in December, both in payback for October gains in production machinery and automobiles.

From a year earlier, factory output is expected to post its first fall in two months, down 4.0%, following a 1.4% rise (revised down from 1.6%) in October and a 2.6% drop in September.

Last month, the ministry maintained its assessment, saying industrial output is"taking one step forward and one step back." It said it will keep a close watch on how global economic growth evolves.

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.