Japan's exports and production shows weak tone

In the October Monthly Economic Report by Cabinet Office, the government's assessment on exports and production were both explained as showing "a weak tone recently". Overall assessment on the economy is explained as "The Japanese economy is on a moderate recovery, while weakness can be seen in some areas". 

This was a downward revision from "The Japanese economy is on a moderate recovery, while slowness can be seen in some areas". This corresponds to the assessment shown when the BoJ implemented additional QQE measures in October 2014. Similarly, production in Q2 2014 (-3.1% qoq) and Q3 2014 (-1.3% qoq) were showing negative growth for two consecutive quarters while production in Q2 2015 (-1.4% qoq) and Q3 2015 (Societe Generale estimate is -1.7% qoq) are also showing the same situation. 

Overall, assessment by the Ministry of Economy, Trade and Industry (METI) on production was "Industrial production fluctuates indecisively" as of October 2014 while the latest assessment as of September 2015 is explained as "Industrial Production has weakened", indicating a weaker assessment this time, says Societe Generale.

Survey of Production Forecasts is showing firm growth of 4.4% mom in October, but this could be revised down substantially, notes SocGen. However, considering that inventories are not much of a concern, we do not anticipate the production trend will tumble. As long as the government and the BoJ keep the policy stance firm, movement towards a complete exit from deflation is intact.