Japan’s output falls but retail sales strengthen

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Japan’s output falls but retail sales strengthen

Japan’s output unexpectedly fell while stronger retail sales and an improving job market showed resilience in the world’s third-biggest economy as Prime Minister Shinzo Abe weighs another sales-tax increase.

Industrial production declined 1.5 percent in August from July, compared with the median estimate of 31 economists surveyed by Bloomberg News for a 0.2 percent gain. Retail sales increased 1.9 percent from the previous month, as the jobless rate slid to 3.5 percent.

The data underscored headwinds for manufacturers as the yen trading near a six-year low fails to boost output, even as domestic demand crawls back after a blow from April’s sales-tax increase. Abe’s government has signaled it is prepared to boost stimulus to help consumers and businesses weather any further increase in the levy next year.

“Consumption related data shows signs of picking up but production is weak, so the negative side prevailed overall,” said Akiyoshi Takumori, chief economist at Sumitomo Mitsui Asset Management.

The yen touched 109.75 on Monday, the highest since August 2008. The Topix stock index fell 1.1 percent.

Output is forecast to rise 6 percent in September and decrease 0.2 percent in October, yesterday’s report showed.

Abe will decide by the end of this year whether to raise the tax to 10 percent in October 2015 from the current 8 percent.

The economy is forecast to rebound this quarter, posting growth of 3.4 percent, according to a Bloomberg News survey of economists, after gross domestic product contracted an annualized 7.1 percent in the three months through June.

The government won’t raise the sales tax again without taking steps to support the economy, Economy Minister Akira Amari said earlier this month. A back-up plan for stimulus will be prepared, according to Finance Minister Taro Aso.

Toyota Motor cut domestic output by 10 percent in August from a year earlier, the fifth straight monthly fall.

Nissan Motor slashed output in Japan by almost 21 percent, the third straight monthly cut. Nissan’s domestic sales dropped 21 percent in August, the seventh straight monthly decline.

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