Japanese industrial output for March was a sequential improvement
Japanese equities rallied on the back of the broad US rally and March Industrial Output data, which came in well above economist estimates at a 1.6% improvement over February -the first sequential monthly improvement in 6 months. The chart below illustrates the same data on an absolute and year-over-year basis, which paints a decidedly less enthusiastically bullish picture.
Clearly output improved on the margin, just as slamming into the canyon floor is finding a bottom -but our thesis on Japan remain s eth same. The anemic stimulus package that Aso's government has formulated will not be enough to offset external demand, and waiting for US consumer demand to return (or Chinese consumer demand to develop) for exports like high-end automotive will take a good while. Still, Aso's trade mission to Shanghai today reflects Japan's commitment to working with the Client, and every indication is that Chinese appetite for heavy equipment is surging, a massive positive for heavy industrials. Clearly the glass-half-full crowd will find reason enough to be positive.
Tactically, Keith covered our EWJ short heading into last night's data (excellent trade on his part) and we will look to re-short higher in the near term unless the Yen declines and provides exporters with greater breathing room or the broad economic data provides more significant bullish signals.