Weak real exports likely to pet Japan's industrial production for May

Japan's real exports (-4.9% mom) is very weak. Therefore, industrial production for May is expected to be weak (-2.2% mom), after firm growth in April (+1.2% mom), states Societe Generale. 

As this year's Golden Week holidays (end-April to beginning of May) were longer than usual (owing to the calendar), many companies were off for a longer period, resulting in a temporary weakness in production and exports.

However, consumption in the US is recovering rapidly in Q2. As producers havebeen cautious regarding inventory investment in the past, the level of inventories is not a major problem. Both production and exports after June are likely to show firm strength, adds SocGen. 

The production trend for 2015 will depend on how strongly Japanese exports can recover thanks to the US economic recovery. 

"Assuming firm domestic demand on the back of an expansion in aggregate wages, the production trend is expected to continue to strengthen. In addition, as the plan regarding inventories is gradually shifting from inventory adjustment to inventory investment, production is likely to strengthen ahead", said Societe Generale in a report on Monday.