Domestic demand to support output growth in Japan

Market consensus expects a month-on-month rise of 1.3% in February industrial production.

DBS Group Research said:

This is consistent with the official survey of production forecast conducted one month ago (1.7%), and also in line with the improvement seen in the latest exports data (2.9% MoM sa in Feb).

Besides the recovery in export demand, investment demand in the domestic sector should also provide a support to output growth.

Machinery orders and construction orders have been both trending up since late-2011 and continued the uptrend as of Jan12, thanks to the recovery in capital spending in the manufacturing sector that was delayed by last year’s earthquake disaster and European debt crisis, as well as the increase in reconstruction spending in non-manufacturing sectors.

Whereas uncertainties still linger over the outlook of global economy, domestic demand should hold up relatively well to support the output growth in Japan.