— Japan Feb Industrial Output +0.4% M/M Vs Jan +1.3% M/M
— Japan Feb Industrial Output MNI Poll Median Forecast -0.3% M/M
— Japan Industrial Output Posts 4th Straight M/M Rise in Row
— METI Forecast Index: Japan March Output +1.4% M/M, April -1.3%
— METI Repeats View: Japan Output Continues to Show Upward Move
— METI Adds: Need to Watch Quake Impact on Output
— Japan Feb Industrial Output +2.8% Y/Y Vs Jan +3.5%

TOKYO (MNI) – Japan’s industrial output rose in February for a
fourth straight month on a recovery in demand for passenger cars,
another sign that the economy at that time was continuing its move out
of the temporary dip seen in late 2010, data from the Ministry of
Economy, Trade and Industry released on Wednesday showed.

However, output is likely to turn sharply downward starting in
March due to the effects of the devastating March 11 earthquake and
tsunami that damaged or destroyed factories and electrical generating
capacity in northeastern Japan, economists have warned.

Production at the nation’s factories and mines rose a seasonally
adjusted 0.3% in February from the previous month, bringing the
industrial output index to 96.4, the highest since October 2008, when
the index stood at 100.1.

The February headline figure was stronger than most economists
expected, with the median forecast in a Market News International survey
calling for a 0.3% fall.

In addition, the seasonally adjusted monthly rise in February came
in slightly above the 0.1% m/m gain predicted in the ministry’s forecast
survey last month.

METI’s survey of firms’ forecasts at that time showed that overall
production was expected to rise 1.4% m/m in March — revised down from
the 1.9% rise estimated in the previous survey — and would decline by
1.3% in April (first estimate). However, a ministry official said that
the outlook survey did not take account of earthquake effects.

Based on the latest data and the outlook for the next two months,
METI maintained its assessment, saying that industrial production is
“continuing to show an upward movement.”

But the ministry said that the impact of the earthquake needs to be
watched closely.

Ahead of the earthquake, automakers, which carry a heavy weighting
in the index, were preparing to boost their production thanks to brisk
demand outside of Japan. They had slashed output in the preceding months
after the government ended its subsidy program in September.

In February, output of transportation equipment — mostly
automobiles — rose 3.4% from January following a 7.5% rise in the
previous month.

This was led by a 2.1% rise in production of large passenger cars
with engine displacement of over 2000cc, a 7.8% gain in the assembly of
small passenger cars with engine displacement of over 660cc but less
than 2000cc, and a 6.6% increase in output of mini-cars with engine
displacement of less than 660cc.

Looking ahead, the earthquake poses major downside risks to Japan’s
fragile, export-led recovery.

The government said last week that the massive damage inflicted on
Japan’s northeastern Pacific coast is estimated at up to Y25 trillion
($309 billion), making it the costliest natural disaster in the
country’s post-war history.

The official estimate, which was the first released after the
tsunami caused by the quake devastated fishing ports and farmlands, was
based on the assumption that 80% of existing buildings and factories in
the quake- and tsunami-hit zones of Iwate, Miyagi and Fukushima
prefectures in northern Japan were damaged.

The estimated damage would exceed the toll of around Y9.6 trillion
from the Great Hanshin Earthquake, which hit western Japanese port city
of Kobe on Jan. 17, 1995.

Compared with the year-earlier level, production in February rose
2.8%, decelerating from +3.5% y/y in January.

Other details from the latest data:

Shipments: February +1.7% m/m Vs January +0.6%, posting the fourth
straight monthly rise.

Inventories: February +1.5% m/m Vs January +4.0%, marking the third
straight m/m rise.

The inventory-to-shipments ratio: February -2.2% m/m Vs January
-0.2%.

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

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