- Izumi Devalier, HSBC economist
Japan's industrial production declined slightly in March for the second straight month as the nation struggles to grow despite lower prices for oil and a booming stock market. Industrial output dropped 0.3% last month, coming in well above the 2.3% fall expected by economists. For the January-to-March period, industrial output increased 1.7% on-quarter, double the 0.8% rise in the fourth quarter. While the production data was better than expected, the quarterly gain in output may be outweighed by lacklustre consumption when gross domestic product data is published May 20. Japan's economy grew 1.5% in the fourth quarter, after two consecutive contractions in the preceding quarters. Industrial output is a measure of business investment and activity, and accounts for key part of quarterly gross domestic product data.
Meanwhile, the Bank of Japan defied expectations it might expand its monetary stimulus to revive, keeping policy unchanged. As widely expected, the BoJ kept its pledge to expand base money at an annual pace of 80 trillion yen through purchases of government bonds and risky assets. BOJ Governor Haruhiko Kuroda also expressed confidence his massive stimulus programme was succeeding in breaking the "deflationary mindset" that chased Japan for 15 years. Yet, many analysts expect the BoJ to ease policy later this year as inflation slides further away from its target.
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