- Capital Economics
Japan's industrial production declined the most since March 2011 earthquake as declining exports curtailed demand and amid a nationwide output shutdown at Toyota Motor Corp. Industrial output plunged 6.2% in February from the previous month, according to the Ministry of Economy. The government expects that output will increase 3.9% this month and 5.3% in April. Yet, the decline in output was likely exaggerated by Japan's largest automaker stopping production at all its factories in Japan between Feb. 8-13. Toyota halted output due to a problem with parts supplies stemming from an explosion at a steel maker Aichi Steel Corp. on Jan. 8. Nevertheless, the data suggest industrial production is undermining growth in the first quarter, adding to signs of weakness in the world's third biggest economy in early 2016, after a 1.1% annualized contraction in real GDP in the last three months of 2015.
Economists predict the Japanese economy to grow 0.6% in the January-March period. However, if Japan's GDP contracts again, that would be the sixth quarterly contraction and second recession since Shinzo Abe returned as prime minister in December 2012. A number of economists already expect the BoJ to announce an expansion of the asset-buying programme or to lower interest rates further, having already deployed a negative interest rate strategy in January.
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