"Factory output is a bit weak now but will return to levels before the March 2011 earthquake around October. Companies are starting to produce more and aren't too worried about uncertainties in the overseas economy."
- Takeshi Minami, chief economist at Norinchukin Research Institute
Japan's industrial production slipped more-than-expected in August following a hefty lift in the preceding month, but the government sees factory activity and the nation's economy on path to a steady recovery backed by robust domestic demand and exports. The 0.7% drop, reversing a 3.4% gain in July, is one of the last pieces of economic data, which the government will be able to analyse before its decision on Tuesday on whether to raise the sales taxes, a move some fear will derail Japan's fragile economic recovery. Also due Tuesday are the Bank of Japan's quarterly Tankan survey, a widely watched indicator of confidence in the corporate sector, and household spending data. A separate report showed manufacturing activity rose at the fastest pace in September since the earthquake in March 2011, underlining the strength of the world's third largest economy. Retail sales also rose 1.1% to 11.315 trillion yen in August from the previous year, beating forecasts for an increase of 1.0% after the 0.3% fall a month earlier. The data is unlikely to change expectations for Prime Minister Shinzo Abe to decide on the planned hike of the sales levy from the current 5.0% to 8.0%, which seen to be crucial to chopping the nation's massive national debt. If Abe follows through the tax hike, all eyes will turn to the BoJ to see if the central bank expands its massive minatory stimulus to counter any downturn from the higher levy.
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