Japan's industrial production posted a third straight fall on the month in January with a 1.1% slip (vs. consensus -1.4%), dragged down by lower demand for semiconductor-producing equipment and computer chips. The initial reading of a slight 0.3% gain in December has been revised down to a 0.2% dip that follows a 2.2% slump in November and a 2.8% jump in October.

The Ministry of Economy, Trade and Industry said nine out of the 15 industries recorded gains while six showed declines. METI's survey of producers indicated that output would rebound a solid 2.3% in February, led by output of semiconductor-producing equipment and computer chips, before slipping back 2.0% in March, when vehicle and general machinery productions is seen falling.

From a year earlier, factory output bounced back 2.6% in payback for the 6.7% plunged in January 2024 that was triggered by suspension of all domestic production by Toyota Motor group firm Daihatsu over a vehicle safety scandal from late December until mid-February, which had a widespread impact beyond the auto industry. Toyota also suspended shipments of 10 models after its supplier Toyota Industries admitted to cheating on engine testing. The rebound followed decreases of a revised 1.6% in December and 2.7% in November and a 1.4% gain in October. It was largely in line with the consensus forecast of a 2.4% rebound.

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 a third straight fall on the month in January, down 1.4%, dragged down by sluggish export demand. The initial reading of a slight 0.3% gain in December has been revised down to a 0.2% dip that follows a 2.2% slump in November and a 2.8% jump in October. The monthly survey by the Ministry of Economy, Trade and Industry released last month indicated that output would slip back 2.1% in January before marking a partial 1.2% rebound in February.

From a year earlier, factory output is expected to have rebounded 2.4% in payback for the 6.7% plunged in January 2024 that was triggered by suspension of all domestic production by Toyota Motor group firm Daihatsu over a vehicle safety scandal from late December until mid-February, which had a widespread impact beyond the auto industry. Toyota also suspended shipments of 10 models after its supplier Toyota Industries admitted to cheating on engine testing. The expected rebound would follow decreases of a revised 1.6% in December and 2.7% in November and a 1.4% gain in October.

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.