Industrial Production YoY

Industrial Production YoY is the year-on-year change in Japan mining and manufacturing output versus the same month one year earlier. It belongs to the Indices of Industrial Production (IIP), METI's monthly program compiled by its Economic Analysis Office. The base year is 2020, set to 100, with 408 items for production and shipments and weights revised every 5 years. It excludes services, construction activity and sentiment readings, so it has no PMI-style 50 expansion line.

Responses for reference month M come through the Current Survey of Production under two fixed rules. The preliminary report appears around the next month-end at 8:50 a.m. Japan time with forecasts for the current and next month. The revised report appears in the middle of the second following month at 1:30 p.m. with capacity and operating data, per an advance calendar.

Each release gives a one-line assessment, four indices as monthly adjusted and yearly original tables, and top contributors. Preliminary figures are updated in the revised report, with yearly fixes to January, new seasonal factors and 5-year updates.

Moves reflect goods demand, stock balance and factory limits across industries and uses.

• Production index: shows overall mining and manufacturing output across 408 items using value-added weights.
• Shipments index: aggregates goods sent out to track demand using shipment-value weights.
• Inventories index: shows end-of-month unsent producer stocks across 291 items using inventory-value weights.
• Inventory ratio index: compares stocks to shipments to show supply-demand balance across 283 items, excluding strongly seasonal items.
• Capacity and operating ratio: capacity shows maximum output for manufacturing only across 139 items. Capacity is never seasonally adjusted; operating ratio shows use momentum, not an absolute rate level.
• Production forecast: shows producers' plans for the current and next month from the Survey of Production Forecast in Manufacturing. It covers 186 items outside the IIP system.

The January 2024 revised report, released March 19, 2024, shows why adjusted and original readings differ. Production stood at 98.0, down 6.7% on the month on an adjusted basis, but 92.4, down only 1.5% on the year on an original basis. Shipments stood at 96.6, down 7.5% on the month, and 90.5, down 1.7% on the year.

Inventories stood at 101.0, down 1.7% on the month, and 102.1, down 1.8% on the year. The inventory ratio rose 2.6% on the month to 105.5 and 0.8% on the year to 113.8.

Capacity held at 98.5, up 0.0% on the month and 0.1% on the year. Operating use fell 7.9% on the month to 98.6 and 4.4% on the year to 94.9. Monthly and yearly gauges therefore answer different questions, and output can collapse while capacity holds steady.

1. Item index: Each item's monthly quantity is set against its 2020 average as 100. Example: 110 units versus 100 gives 110.
2. Aggregation: Totals average item indices with fixed 2020 Laspeyres weights of value-added, shipment and inventory values. For example, weights 60 and 40 with indices 110 and 95 give 104.0.
3. Seasonal adjustment: X-12-ARIMA, a U.S. Census Bureau method, removes seasonal and calendar effects, while capacity stays unadjusted. Adjusted output equals original divided by seasonal and trading-day factors, about 102.0 from 104.0 when the factor is 1.02. Inventories use seasonal factors only.
4. Reported change: Monthly change uses adjusted data and yearly change uses original data versus the same month one year earlier. For example, 104.0 against 100.0 a year earlier gives +4.0%.
5. Special ratios: Inventory ratio divides monthly stocks by shipments and operating ratio divides output by capacity before indexing.
6. Forecast check: Planned output is indexed separately, with realization and amendment rates showing plan errors and shifts. For example, 100.0 against 90.0 gives 11.1%, while 105.0 against 110.0 gives -4.5%.