Japan industrial production posts surprise contraction in January

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Industrial output in Japan staged an unexpected reversal in January and contracted for the first time in six months.

The preliminary reading from the Ministry of Economy, Trade and Industry showed industrial production shrank 0.8 per cent month-on-month in January, down from growth of 0.7 per cent in December. Economists had expected a gain of 0.4 per cent.

A 0.4 per cent contraction in July was the previous time production turned negative and one of only three months last year when production shrank.

Driving the decline in production, shipments contracted for the second month in a row, while inventories moderated to zero growth.

The most recent data kept the annual pace of production steady at 3.2 per cent, but well short of expectations for 4.3 per cent growth. This is still a relatively healthy level given production grew in November at its fastest pace since March 2014.

The data prompted the yen to ease by 0.1 per cent to ¥‎112.8 per dollar this morning.

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