“The overall economy including factory output is expected to contract sharply in the current quarter,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.
Japan’s industrial output slipped for the second straight month in November, raising the likelihood the economy will contract in the fourth quarter due to slowing demand abroad and at home.
Japan’s economy has cooled in recent months due to a prolonged hit to exports from soft global demand and a slide in consumer spending following a nationwide tax hike.
Official data showed factory output fell 0.9% in November from the previous month, a slower decline than the 1.4% fall in a Reuters forecast.
That followed a downwardly revised 4.5% decline in the previous month, the largest month-on-month slump since the government started compiling the data in comparative form in January 2013.
“The overall economy including factory output is expected to contract sharply in the current quarter,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.
“It is expected to rebound in January-March but the issue is how much it will recover.”
Production was pushed down by a decrease in output of production machinery and information equipment, which offset a bounce back in output of cars and car engines.
“There is still uncertainty for the economic outlook as the effects from the U.S.-China trade friction will likely remain but there are positive signals for a moderate pickup in factory output,” said Hiroaki Mutou, chief economist at Tokai Tokyo Research Institute.
Manufacturers surveyed by the Ministry of Economy, Trade and Industry expect output to gain 2.8% in December and rise 2.5% in January, the data showed.
Separate data released on Friday showed retail sales dropped a larger-than-expected 2.1% in November as consumer sentiment stayed depressed after October’s sales tax hike.
The weak readings could pressure the government to come up with new ways to boost growth and force the central bank to maintain its stimulus program.
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