Japan's January industrial production inched 1% higher

But that's just an initial figure.

According to DBS, the final estimate of January industrial production will likely reaffirm the view of positive GDP growth in 1Q. Based on the preliminary figures, industrial production rose 1.0% MoM sa in January, the second consecutive month of positive gains (2.4% in Dec12). 

The rebound has been well supported by the improvement in final demand, as evidenced by the recent upticks in both retail sales and real exports.

Here's more from DBS:

The Abenomics policy has so far successfully boosted sentiments, with equity prices surging more than 20% and consumer confidence climbing to a 5-year high.

We expect consumption to continue improving in the coming months on the back of positive confidence and wealth effects.

A more notable recovery in exports supported by JPY depreciation and global demand growth would come in 2Q, considering the time lag between FX movements and adjustments of export contract prices.

Meanwhile, the increase in government spending on public construction is expected to lend support to investment in 2H.

Back to the supply side, government surveys showed that manufacturers will lift output further by 5.3% in February and 0.3% in March.

It would be overoptimistic to forecast such a strong growth, given the historical deviations in actual IP growth and government survey results.

Inventory adjustment pressures also remain for the time being, constraining a strong recovery in manufacturing production.

Nonetheless, even if assuming modest growth of only 0.5% MoM in February and March, industrial output in 1Q can register a double digit growth of 10% QoQ saar, which points to a strong rebound in 1Q GDP.