The trend should be reasonably clear, and certainly the recent wave seems to have peaked back in December last year. Of course, as Claus was pointing out yesterday not everything is gloom at the moment. But the situation is complex, and for the time being we simply need to keep monitoring the data. It is however hard to envisage a rapid interest tightening process in this environment (especially when you look at this recent US durable goods release).
Japan’s industrial production unexpectedly fell in May from a month earlier, casting doubt on an anticipated rebound in output and raising the hurdle for the Bank of Japan to raise rates in the coming months. Industrial output fell 0.4 per cent in May from April, government data showed on Thursday, much weaker than a median market forecast for a 0.8 per cent rise and marking the third straight month of decline.
The weaker-than-expected reading hurt the yen, which slipped to near 123.35 to the dollar from 123.20.
Manufacturers’ output – the core component of production – is expected to rise 1.9 per cent in June and rise 1.7 per cent in July, the data from the Ministry of Economy, Trade and Industry showed.
Still, the ministry downgraded its view on output, saying it is flattening. That compared with the previous month’s assessment that output was in a moderately rising trend.
Industrial production fell in January-March for the first time in six quarters, but many economists thought the drop was a reaction to a sharp rise in October-December and that output would rebound in April-June.
The May output data may call such thinking into question and heighten worries over Japan’s corporate-sector strength.
