JP: Industrial Production

Highlights

Japan's industrial production was nearly flat in December, with a second straight decrease, down 0.1% on the month, as the impact of stiff Trump tariffs on automobiles and metals emerged more in the final quarter of 2025. The pace of decline, however, decelerated from a 2.7% slump (revised down from -2.6%) in November, when factory operations took a breather after the production level rose 1.5% to a nearly two-year high in October.

Trade data showed last week that Japan's export values posted their fourth straight rise on year in December, up 5.1%, reflecting solid demand from Europe and Asia that is offsetting the drag from depressed auto exports to the United States. Exports hit a record high of ¥10.4 trillion, surpassing the previous high of ¥9.91 trillion reached in December 2024.

The monthly survey by the Ministry of Economy, Trade and Industry indicated that output would surge 7.2% on the month in January, led by a rebound in transport equipment, before falling back 4.3% in February due to a pullback in autos.

The ministry repeated that industrial output was"taking one step forward and one step back." The last change was made in the July 2024 report, when it upgraded its view.

Details:
Japan Dec industrial output -0.1% m/m (Nov revised down to -2.7% from -2.6%); 2nd straight fall; median forecast -0.4% (range: -1.5% to +0.3%)

Japan Dec industrial output +2.6% y/y (Nov revised down to -2.2% from -2.1%), 1st rise in 2 months; median forecast +2.3% (range: +1.2% to +3.0%)

Japan METI keeps view: industrial output taking one step forward and one step back

Japan OctDec industrial output +0.8% q/q vs. +0.1% in JulySept, +0.4% in AprJune, -0.3% in JanMar, +0.4% in OctDec 2024

Japan OctDec capital goods shipments (ex-transport equipment) +3.9% q/q vs. -3.6% in JulySept, +3.9% in AprJune, indicating capex in Q4 GDP may be firmer (data due Feb. 16)

Japan METI forecast index: Jan industrial output +7.2% m/m (adjusted for upward bias), Feb -4.3%

Japan METI: Dec industrial output m/m slight drop led by chipmaking equipment but largely offset by general machinery

Japan Dec industrial output: 7 out of 15 industries post fall, 7 are up and 1 flat

Market Consensus Before Announcement

Japan’s industrial output is seen falling for a second straight month in December, down 0.4 percent on the month after declining 2.7 percent (revised from down 2.6 percent) in November. The November drop was larger than expected, as production declines in industries including information and communications machinery, automobiles and metal products dragged down overall output.

The December forecast broadly aligns with projections released last month by the Ministry of Economy, Trade and Industry, which said output would slip 0.6 percent during the month before rebounding sharply by 8.0 percent in January. The ministry maintained its long-held assessment that industrial output is “taking one step forward and one step back.”

Trade figures released by the Ministry of Finance for December showed that the negative impact of Trump’s tariff policy continued to weigh on auto production, as exports to the U.S. declined, dragging on overall output. Still, the impact on other industries remained limited, helping keep underlying output conditions relatively firm. On a year-on-year basis, December output is expected to rise 2.3 percent after falling 2.2 percent (revised from down 2.1 percent) in November.

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.

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