Japan to grow steady in Jan 2017 - Nomura

Analysts at Nomura explained that they forecast continued steady growth through January 2017.

Key Quotes:

"According to the results of the December survey of manufacturers’ forecasts for industrial production, output is expected to rise 2.0% m-m in December and increase 2.2% in January 2017. 

Manufacturers’ actual output has a strong tendency to fall short of plans, but even applying past average realization and amendment ratios, we estimate production will remain on an uptrend with increases of 0.3% m-m in December and 2.1% m-m in January. If production plans are similarly discounted, output growth comes to 2.0% q-q for Oct-Dec and to 2.8% for January compared with the Oct-Dec average, pointing to continued underlying strength in production. 

Growth in production forecasts is attributable in large part to certain sectors—electronic parts and devices, information and communication, electrical machinery, and nonferrous metals—and we think particular drivers of growth by category of goods are capital goods (ex transport equipment) and mining and manufacturing producer goods. Production plans for capital goods warrant some caution November industrial production confirmed the steady ongoing recovery in the economy. 

Exports to Asia, Europe, and the US are on an uptrend, and Japanese consumption is showing some signs of promising activity; we think manufacturing activity is getting a boost from these accordingly. In the December BOJ Tankan, FY16 capex plans are weak, which makes us think production plans for capital goods (ex transport equipment) of +0.3% m-m in December and +9.0% m-m in January should be taken with a grain of salt. 

At the same time, we think it fair to conclude that the Japanese economy is basically on a favorable recovery path. We think the Japanese economy will continue to show stable growth in the new year.