| Consensus | Consensus Range | Actual | Previous | Revised | |
|---|---|---|---|---|---|
| Month over Month | 0.1% | -1.0% to 0.7% | 1.7% | 0.5% | -0.1% |
| Year over Year | 2.1% | 1.3% to 5.3% | 4.0% | -1.8% | -2.4% |
Highlights
Key points:
-- Japan's industrial production rebounded 1.7% on the month in June (vs. consensus +0.1%) for the first rise in three months after being nearly flat in May with a 0.1% dip (revised down from a slight 0.5% rise) but its outlook remains sluggish amid lingering uncertainty over U.S. trade rows. Japanese automakers are reducing the prices for their U.S. customers to cover higher import costs triggered by stiff tariffs by President Trump.
--The increase was led by higher output for transport equipment (excluding the auto industry), namely aircraft parts, as well as consumer chips.
--METI: 8 out of the 15 industries recorded gains and 7 showed drops.
--METI's survey of producers indicated that output would slip 1.0% in July before rising 0.8% in August, led by production machinery as well as iron/steel and non-ferrous metals.
--Factory output rose a solid 4.0% on the year (vs. consensus +2.1%) after slumping 2.4% in May (revised down from -1.8%), which was the first drop in five months.
--METI maintains its assessment, saying industrial output is"taking one step forward and one step back."
--In the April-June quarter, production rose a modest 0.3% on quarter following -0.3% in Q1, +0.4% in Q4, +0.3% in Q3 of 2024.
--In Q2, capital goods shipments (ex-transport equipment) rose 4.0% on quarter after dipping 2.4% in Q1, rebounding 3.4% in Q4 on the 2.9% dip in Q3, indicating capex in Q2 GDP were firmer (data due on Aug. 15). The Q2 GDP is expected by many economists to be nearly flat after posting its first contraction in four quarters, down a slight 0.04% q/q (-0.2% annualized), in the first quarter, when net exports slumped in payback for a technical jump in the final quarter of 2024.
Takeaway: Tokyo and Washington have agreed to lower the reciprocal tariff rate to 15% on most U.S. imports of Japanese goods including automobiles and auto parts (50% on iron and steel), down from President Trump's original plan to slap 25% duties on Japan, but the figure is still much higher than the 2.5% rate imposed by the United States before the second Trump administration. Trump tariffs are taking their tolls on Japanese exports and production, which is likely to lead to nearly flat GDP growth for the April-June quarter after a slight contraction in January-March. The focus is on how the high pace of wage hikes set by large companies is spreading to smaller firms amid labor shortages in nearly all major industries. Around 3% inflation is eroding household purchasing power, keeping private consumption in GDP sluggish.
-- Japan's industrial production rebounded 1.7% on the month in June (vs. consensus +0.1%) for the first rise in three months after being nearly flat in May with a 0.1% dip (revised down from a slight 0.5% rise) but its outlook remains sluggish amid lingering uncertainty over U.S. trade rows. Japanese automakers are reducing the prices for their U.S. customers to cover higher import costs triggered by stiff tariffs by President Trump.
--The increase was led by higher output for transport equipment (excluding the auto industry), namely aircraft parts, as well as consumer chips.
--METI: 8 out of the 15 industries recorded gains and 7 showed drops.
--METI's survey of producers indicated that output would slip 1.0% in July before rising 0.8% in August, led by production machinery as well as iron/steel and non-ferrous metals.
--Factory output rose a solid 4.0% on the year (vs. consensus +2.1%) after slumping 2.4% in May (revised down from -1.8%), which was the first drop in five months.
--METI maintains its assessment, saying industrial output is"taking one step forward and one step back."
--In the April-June quarter, production rose a modest 0.3% on quarter following -0.3% in Q1, +0.4% in Q4, +0.3% in Q3 of 2024.
--In Q2, capital goods shipments (ex-transport equipment) rose 4.0% on quarter after dipping 2.4% in Q1, rebounding 3.4% in Q4 on the 2.9% dip in Q3, indicating capex in Q2 GDP were firmer (data due on Aug. 15). The Q2 GDP is expected by many economists to be nearly flat after posting its first contraction in four quarters, down a slight 0.04% q/q (-0.2% annualized), in the first quarter, when net exports slumped in payback for a technical jump in the final quarter of 2024.
Takeaway: Tokyo and Washington have agreed to lower the reciprocal tariff rate to 15% on most U.S. imports of Japanese goods including automobiles and auto parts (50% on iron and steel), down from President Trump's original plan to slap 25% duties on Japan, but the figure is still much higher than the 2.5% rate imposed by the United States before the second Trump administration. Trump tariffs are taking their tolls on Japanese exports and production, which is likely to lead to nearly flat GDP growth for the April-June quarter after a slight contraction in January-March. The focus is on how the high pace of wage hikes set by large companies is spreading to smaller firms amid labor shortages in nearly all major industries. Around 3% inflation is eroding household purchasing power, keeping private consumption in GDP sluggish.
Market Consensus Before Announcement
Key forecast points:
--Japan’s industrial production is expected to be little changed, up just 0.1% on the month in June (forecast range: -1.0% to +0.7% vs. METI’s projection -1.9%) after being also nearly flat in May with a 0.1% dip (revised down from a slight 0.5% rebound) amid lingering global trade rows and heightened geopolitical risks in the Middle East. Factory output is seen up 2.1% on the year after slumping 2.4% in May (revised down from -1.8%), which was the first drop in five months.
--The Ministry of Economy, Trade and Industry is likely to maintain its assessment (the last change was an upgrade in July 2024), saying industrial output is"taking one step forward and one step back.”
--Japan’s industrial production is expected to be little changed, up just 0.1% on the month in June (forecast range: -1.0% to +0.7% vs. METI’s projection -1.9%) after being also nearly flat in May with a 0.1% dip (revised down from a slight 0.5% rebound) amid lingering global trade rows and heightened geopolitical risks in the Middle East. Factory output is seen up 2.1% on the year after slumping 2.4% in May (revised down from -1.8%), which was the first drop in five months.
--The Ministry of Economy, Trade and Industry is likely to maintain its assessment (the last change was an upgrade in July 2024), saying industrial output is"taking one step forward and one step back.”
Definition
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.
Description
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.
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.
