Japan's -0.1% industrial production dip disappoints analysts

It did not hit market expectations.

According to DBS, the latest economic data justify further easing by the BOJ this week. Industrial production stayed flat at -0.1% MoM sa in February, falling short of market expectations of a 2.5% rise.

Despite the solid growth in producer shipments (0.8%), the large inventory adjustments (-2.0%) restricted the performance of output.

On the other hand, inflation stayed negative at -0.7% YoY in February, and March CPI figures in Tokyo reported a deeper decline of -1.0%.

Here's more from DBS:

Although transport prices increased as a result of yen depreciation and more expensive energy imports, prices of other CPI items declined further to offset.

On a positive note, the PMI surveys told that industrial activity may have recovered meaningfully in late-1Q. Manufacturing PMI returned to the expansionary territory in March (50.4), for the first time since May12.

The improvement was driven by significant rebound in both output and new orders – output growth was above the long term trend, and export orders rose at the fastest pace over two years.

Meanwhile, domestic demand indicators have also showed some signs of improvement. Consumer spending is picking up, as evidenced by the solid increase in retail sales (1.6% in Feb) and household expenditures (2.2%),