Japan's Industrial Output:

Article Source: https://mainichi.jp/english/articles/20230131/p2g/00m/0bu/015000c

Article:

TOKYO (Kyodo) -- Japan's industrial output fell 0.1 percent in 2022 from the previous year, the first decline in two years, reflecting weakening overseas demand affected by tighter monetary policy in response to higher inflation, government data showed Tuesday.

The seasonally adjusted index of production at factories and mines in 2022 stood at 95.6 against the 2015 base of 100, the Ministry of Economy, Trade and Industry said in a preliminary report.

The October-December quarter saw the drop of 3.1 percent from the previous quarter, as a series of interest rate hikes overseas dampened investment appetite, a government official explained.

Ideas:

A 0.1 percent decrease is really not that much considering there is always a + or - discrepancy is statistics.

But no doubt the overseas demand situation might have been a variable to consider in the decline.

The 95.6 seasonally adjusted index is probably more reliable that the 0.1 percent decline.

And of course the increase in interest rate which have been factor in decreased investment opportunities.

Article:

Output in April and May also declined, affected by a lockdown in Shanghai to contain coronavirus infections, although production bounced back the following month.

The annual index of industrial shipments dropped 0.3 percent to 93.4, while that of inventories gained 3.2 percent from the previous year to 100.9.

In December alone, production decreased 0.1 percent from the previous month to 95.4, following an upwardly revised 0.2 percent growth in November.

Ideas:

Its important to remember to not get too caught in the month to month details of indexes and or changes in month to month overall. 

What's important is the big picture and what do the long term trends might indicate about the future, not so much about the past.

For example the lockdown in Shanghai is the past and what is important is the future and how Japanese companies are going to respond in the future to the present situation.

Inventories are an interesting indicator as a increase in inventories could mean and drop in demand, it could mean the estimates of future demand what not estimated correctly, or it could mean an logistics challenge where inventories are not being shipped.

Article:

The ministry retained its basic assessment from the previous month that industrial production is "weakening."

Of the 15 industries covered by the survey, 10 logged output falls in the reporting month, four showed increases and one remained unchanged.

By sector, production of general-purpose and business-oriented machinery marked the biggest contraction of 6.0 percent from the previous month, led by boiler components and engines, contributing the most to the overall drop.

Ideas:

It should be remembered that industrial production sometimes is not linear from one to month and there are always going to be seasons or periods of weakening and or less production.

It must be remembered that machine orders are seasonal and or not continuous like other purchases in the economy.

For example companies don't buy new machinery each month like new car buyers don't buy a new car each month.

It would be better to look at the yearly total and see which months are slow and which months are more advantageous to the purchasing of machine orders overall.

Article:

The output of inorganic and organic chemicals remained flat, while that of transport equipment excluding motor vehicles logged an increase of 4.5 percent, led by aircraft parts, data showed.

The index of industrial shipments also dropped 0.7 percent in December to 92.7 for the fourth consecutive month of decline, while that of inventories declined 0.5 percent to 103.1.

Ideas:

It must also be remembered that not all sectors or industries in an economy increase or decrease at the same time, as a market economy always has its ups and downs and there are always going to be some sectors doing better in one month and then other sectors doing better in another month.

But a decline of four consecutive months should be of concern and a decline in inventories might indicate something challenging is causing the overall decline in industrial shipments.

Article:

Based on a poll of manufacturers, the ministry expects output to remain flat in January and grow 4.1 percent in February.

"We still need to keep a close eye on the influence of a potential spread in coronavirus infections, material shortages and high prices," the official said.

Ideas:

To be fair and honest, not to downplay the virus situation but isn't it time to move on and most of the advanced economies has put the virus situation in the past and move from it.

Material shortages are still something to be considered as they are there and might disappear for a while.

The same for high prices related to materials and resources needed for production. 

The goes with saying the the higher prices related to materials and other sources can play a a major role in companies giving needed wage increases for their workers.

Have a nice day and be safe!