Japan's Industrial Output: Updated Nov. 5, 2023.

 Article Source:  https://mainichi.jp/english/articles/20230731/p2g/00m/0bu/006000c

Article:

TOKYO (Kyodo) -- Japan's industrial output in June expanded 2.0 percent from the previous month, led by shipments of motor vehicles on the back of solid demand in both domestic and overseas markets, government data showed Monday.

The seasonally adjusted index of production at factories and mines stood at 105.3 against the 2020 base of 100, the Ministry of Economy, Trade and Industry said in a preliminary report. The increase followed a revised 2.2 percent contraction in May.

Ideas:

Industrial output is never linear or positive growth as there are many stops and starts related to industrial production.

For example Toyota had to take some plants off-line as they has complications with production.

All data starts out as preliminary and as other data and information is found, the indexes might be adjusted as needed over time.

An index is just a number and doesn't really show what is happening with each company as some companies might have good results and some companies might have challenges related to materials and so on.

Article:

The ministry maintained its basic assessment for the reporting month, saying industrial production was "showing signs of moderately picking up," while forecasting a dip in July and recovery in August.

Of the 15 industrial sectors the survey covers, output in 10 increased whereas production in five dropped.

Ideas:

As with other assessments, using the language of "showing signs of moderately picking up" is a good way to not show too much concern as the scare the capital or financial markets.

A forecast is nothing more than a "best guess" as to what might happen in the future. Of course they might use past data and computer programs to make the forecast but a forecast is never perfect, as its just ideas for the future.

There might be a dip or decrease in July as its the Obon season, or summer vacation period in Japan,  and maybe many companies have their vacations during that time, while they get back to work in August and production picks up again.

An economy, Japanese economy, has many sectors and the industrial sector might have many parts and not all increase or decrease at the same time as there are stops and start, material challenges, energy challenges and so on.

Article:

Among the 10 sectors reporting rising output, motor vehicles surged 6.1 percent, propped up by transmission, steering and other parts as well as trucks.

Production of electrical parts and devices also contributed to the overall rise with a 6.8 percent increase due to brisk demand for smartphone components and recovering demand for integrated circuit memory chips.

Ideas:

The car market and production is strong economic driver of the Japanese economy, as demand for cars in Japan and globally is always strong.

The Japanese smartphone market is a mixed bag as many Japanese smartphone companies have thrown in the towel because the I-phone and now Samsung are major players in the Japanese market.

And then of course Chinese smartphones are entering the Japanese market too which place more stress and pressure on Japanese smartphone companies.

Of course there might be many small smartphone component companies in Japan that make parts for Samsung, Apple, and other companies globally, as Japan is very good at making small components for electrical products.

Article:

The output of production machinery rose 0.2 percent, led by semiconductor manufacturing equipment due to solid exports, a ministry official said.

Among the sectors reporting decreased output, petroleum and coal products declined 5.3 percent and pulp, paper and paper products shed 2.1 percent due mainly to regular maintenance and repair work at some major plants, according to the ministry.

Ideas:

Its interesting that Japan is still in the semiconductor manufacturing business as Taiwan and South Korea have most of the market share.

But the electrical components needed for electrical products is very diverse and maybe one or two companies in South Korea and one company in Taiwan, don't make all the semiconductor products that are needed for all electrical products including cars.

Production facilities or plants are always being shutdown for routine maintenance or repair work throughout the year, and as such production might decrease during the year.

Production, again, is never linear, meaning there are sudden stops and starts, but some of the stops and starts are sometimes planned as plants need to be re-tooled and or repaired as needed.

Article:

The index of industrial shipments rose 1.5 percent to 104.8 for the first increase in three months, while that of inventories fell 0.1 percent to 105.5.

Based on a poll of manufacturers, the ministry expects output to decline 0.2 percent in July and climb 1.1 percent in August.

The official pointed out the need to closely monitor the effects of downside risks in overseas economies and the impact of high prices.

Ideas:

Japan is very good at producing products for industrial use. Some are major manufacturing companies that make many industrial products and then there are small manufacturing companies that might make just one industrial product for a product.

A said, before July is the Obon season for the Japanese summer vacation time, and many companies might take vacations during that time, which might reduce or slow production.

For Japanese exporters, higher prices can be both a positive and a negative, as the weak yen bring higher sales for Japanese companies, for example in the US. 

But it can be negative too, as Japanese products compete with Korean products and Chinese products as all three countries makes similar products and if Japanese products become too  expensive they lost out to those from China and South Korea.

Have a nice day and be safe!