Japan March factory output rises as vehicle production recovers

TOKYO (Reuters) -Japan's factory output grew more than expected in March, government data showed on Tuesday, thanks largely to automakers resuming production after safety scandals.

Industrial production rose 3.8% in March from the previous month, the Ministry of Economy, Trade and Industry (METI) showed, better than the median market forecast for a 3.5% rise.

"Coupled with solid output forecasts for April and May, the strong rebound in industrial production in March suggests that the likely slump in GDP in Q1 should be followed by a strong rebound this quarter," said Gabriel Ng, assistant economist at Capital Economics.

Motor vehicle production rose 9.6% in March from the previous month. Output in regular passenger cars and regular trucks boosted the overall figures.

Japanese automaker Toyota Motor restarted production of some models in early March after irregularities in certification tests were found in affiliate Toyota Industries' diesel engines.

Toyota's small-car unit Daihatsu, which was mired by misconduct related to rigged collision-safety tests, has gradually resumed vehicle production from February onwards.

"We'll continue to monitor the global economy and the resumption of plant operations by the automobile industry," a METI official said.

The manufacturing of production machinery, including semiconductor production equipment, went up 11.6%. Electronic parts and device output increased 9.2%, according to METI.

Manufacturers surveyed by the industry ministry expect seasonally adjusted output to increase 4.1% in April and expand 4.4% in May.

However, the METI official said a prolonged production disruption at Toyota's domestic plant over quality checks for Prius cars could put downward pressure on factory output in April.

Separate data showed Japanese retail sales expanded 1.2% in March from a year earlier. The result was below the median market forecast for a 2.2% rise but marked the 25th consecutive month of expansion.

Compared with the previous month, retail sales shrank 1.2% in March, following a 1.7% gain in February, the data showed.

(Reporting by Satoshi Sugiyama; Editing by Chang-Ran Kim, Christopher Cushing and Lincoln Feast.)