— Japan Dec Industrial Output +4.0% Y/Y; MNI Fcast +2.7%
— METI Forecast Index: Japan Jan Output +2.5% M/M, Feb +1.2%
— METI Keeps View: Japan Output Appears To Be Flat
— Japan 2011 Industrial Output -3.5% Y/Y Vs +16.4% in 2010

TOKYO (MNI) – Japan’s industrial output rebounded more sharply than
expected in December as the supply chain breakdown in flood-hit Thailand
eased, allowing factories to produce more cars, digital cameras and
semiconductors, government data showed Tuesday.

Production at the nation’s factories and mines rose a seasonally
adjusted 4.0% in December from the previous month after dropping 2.7% in
November. This pushed up the industrial output index to 93.6, but it was
still below the pre-disaster level of 97.9 in February.

The December headline figure came in much higher than the median
forecast for a 2.7% rise in a Market News International survey of
economists.

The 4.0% rise was the largest month-on-month gain since +6.2% in
May 2011 but it was below the 4.8% m/m rise predicted in the ministry’s
forecast survey released last month.

METI’s latest survey of firms’ forecasts showed that overall
production is expected to rise 2.5% m/m in January — revised down from
the 3.4% gain estimated in the previous survey — before rising 1.2% in
February (first estimate).

In the final quarter of 2011, industrial output dipped 0.4% from
the previous quarter, the first quarterly decline in two quarters,
following a 4.3% surge in the third quarter.

Based on the latest data and the outlook for the next two months,
METI maintained its overall assessment, saying: “Industrial production
appears to be flat.”

But a METI official told reporters that European debt crisis and
the strong yen remain key downside risks to a sustained recovery in
industrial output, which was first hit by the March earthquake disaster
and now by slowing global demand.

In December, output of transportation equipment (mostly
automobiles), which was the hardest hit by the major flooding in
Thailand last year, rose 12.3% from the previous month, marking the
first rise in two months after a 10.0% drop in November.

In addition, production of information and communication
electronics equipment, which was also affected severely by the floods in
Thailand, rose 34.8% in December, posting the first m/m gain in five
months following a 23.7% drop in November.

Compared with year-earlier levels, Japan’s industrial production in
December declined 4.1%, marking the second straight decline, after
falling 4.2% in November.

In 2011, industrial output fell 3.5% on the year, posting the first
drop in two years after rising 16.4% in 2010 and plunging 21.9% in 2009.

Other details from the latest data:

Shipments: Dec +4.5% m/m Vs. Nov -1.6%, the first rise in two
months.

Inventories: Dec -2.9% m/m Vs. Nov -0.6%, the second straight
decline.

The inventory-to-shipments ratio: Dec -3.6% m/m Vs. Nov -1.6%, the
third straight drop.

tokyo@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4835 **

[TOPICS: M$J$$$,M$A$$$,MAJDS$,MT$$$$]