September industrial production jumped 2.2% month‑on‑month, outpacing forecasts, but retail sales fell short, giving the Bank of Japan a mixed signal ahead of its policy decision.

Japan’s September factory output surged 2.2% from August, well above the 1.3% rise economists had pencilled in, and reversed a 2.4% decline recorded in the previous month. Year‑on‑year output was up 1.9%, a slower pace than the 2.7% gain seen in August.

Manufacturers raise production outlook

Surveyed firms under the Ministry of Economy, Trade and Industry now expect a 5.1% jump in October’s output – a sharp upgrade from the 3.1% forecast a month earlier – with a further 0.8% rise slated for November. If realised, the revisions would give industrial activity a strong tailwind into the year‑end.

Retail sales weaken

Consumer spending told a different story. Retail sales slipped 0.7% month‑on‑month, marking a second consecutive decline after a 1.2% drop in August. On an annual basis, sales grew 2.3%, well below the 3.3% consensus and slower than the 2.9% pace recorded in September.

What traders are watching

• The BoJ’s policy decision later Friday, with a 1.25% rate hold widely expected
• Potential signals of a December rate hike in the Outlook Report
• Developments in oil prices linked to the Iran conflict that could pressure margins and household budgets

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This article is compiled from international market news for information only. It is not investment advice.