— Japan June Industrial Output -0.1% M/M; MNI Forecast +1.6%
— METI Forecast Index: Japan July Output +4.5% M/M, Aug 0.6%
— Japan June Industry Output Posts 3rd Drop In Row; May -3.4%
— Japan Apr-Jun Output -2.2% Q/Q, 1st Drop in 4 Quarters
— METI Cuts View: Japan Industrial Output Appears To Be Flat

TOKYO (MNI) – Japan’s industrial output unexpectedly fell in June
mainly on sluggish automobile demand as the effects of government
subsidies continued to wane amid the global economic slowdown, data from
the Ministry of Economy, Industry and Trade showed Monday.

Production at the nation’s factories and mines dipped a seasonally
adjusted 0.1% in June from the previous month, marking a third straight
monthly drop, while the industrial output index fell to 92.1, the lowest
since 89.4 in May last year.

The June headline figure came worse than the median forecast for a
1.6% increase in a MNI survey of economists, while it was way below the
2.7% growth predicted in the previous month’s METI report.

METI’s latest survey of firms’ forecasts showed that overall
production is expected to rebound 4.5% m/m in July — revised up from
the 2.4% rise estimated in the previous survey — before dropping by
0.6% in August (first estimate).

Industrial output fell 2.2% in April-June from the previous three
months, the first fall in four quarter, following a 1.3% rise in the
January-March quarter.

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

It was the first downward revision since September 2011.

In the previous month’s report, it said that “Industrial production
has been picking up.”

In June, output of transportation equipment — mostly automobiles
— fell 4.3% from the previous month, a second straight fall, following
a 11.1% drop in May, as the stimulative effects of revived government
subsidies for buying low-emission vehicles continued to wane.

Automobile sales sagged in most of 2011 after the government ended
subsidies for buying greener cars and trucks in September 2010 but they
had been supported until recently by the resumption of the program in
December last year.

However, the program may now be terminated in July or August, one
to two months earlier than expected, as it is running out of money due
to high demand, press reports have said.

The government also revived last year its temporary reward program
for buying energy-saving houses while the government-affiliated Japan
Housing Finance Agency resumed offering low rates on long-term loans for
home buyers.

But the land ministry has stopped receiving applications for reward
points, which were given to owners of greener homes under construction
or those being renovated to save energy consumption. The program was
terminated nearly four months earlier than the Oct. 31, 2012 end-date in
the original plan.

In the face of the global slowdown, China’s central bank last month
lowered benchmark lending and deposit rates for the first time since the
global financial crisis in the most aggressive move yet to shore up
growth.

European Union policymakers are also struggling to rein in the
region’s sovereign debt crisis, as Spain, the fourth largest economy in
euro-zone, has seen yields on its 10-year debt climb above the closely
watched 7%.

Compared with year-earlier levels, Japan’s industrial production in
June fell 2.0%, marking the first fall in five months, after a 6.0% rise
in the previous month.

Other details from the latest data:

Shipments: June -1.5% m/m Vs. May -1.3%, a second straight fall.

Inventories: June -1.4% m/m Vs May -0.7%, a second straight fall.

The inventory-to-shipments ratio: June +4.0% m/m Vs. May -3.7%, the
first rise in two months.

tokyo@marketnews.com
** MNI Tokyo Newsroom: 81-3-5403-4835 **

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