Japan’s industrial output is expected to return to a downward path in November, falling 1.3 percent from the previous month after rising unexpectedly in October, driven by a recovery in auto production as well as gains in industries such as electrical machinery and information and communications equipment.

Output in November is seen falling as cuts are anticipated in sectors including transport equipment, information and communications machinery, and chemicals. Persisting U.S. tariff policies are also seen weighing on production in the auto and metals sectors. The Ministry of Economy, Trade and Industry has projected that output will slip 2.6 percent in November before declining a further 2.0 percent in December. The ministry maintained its long-held assessment that industrial output is “taking one step forward and one step back.”

On the year, November output is expected to dip 1.0 percent after rising 1.6 percent (revised from up 1.5 percent) in the prior month.

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.