The data released overnight again disappointed and suggest that the recovery in the wake of the consumption tax hike in April will be weaker than expected, albeit Japan will return to positive GDP growth in Q3 after contracting 6.8% q/q ann. in Q2. Clear downside risk to our forecast of 3.0% q/q GDP growth in Q3.
Industrial production in July increased 0.2% m/m (consensus: 1.0% m/m) after declining 3.4% m/m in June. According to the production plans released in connection with the data, manufacturers plan to increase industrial production by 1.3% in August and 3.5% in September. Actual production tends to undershoot production plans substantially. Our forecast for industrial production in August and September based on the industrial production plans is now 0.2% m/m and 1.5% m/m respectively. Hence, industrial production will recover gradually but is now expected to contract 1.2% q/q in Q3 after contracting 6.8% q/q in Q2. Hence, industrial production at the moment points to a relatively weak recovery in Japan.
To Read the Entire Report Please Click on the pdf File Below