Factory production in Japan fell for the first time in three months in January, weighed down by the global slowdown and regional holidays while retail sales beat expectations, creating a mixed picture for BoJ leader candidate Kazuo Ueda.
Industrial production contracted 4.6% from December, according to data from the Ministry of Industry released on Tuesday, worse than economists had expected.
Automobiles, auto parts and chip-making machinery led the decline. As the decline in global demand and the Lunar New Year holiday affected production, despite the increase in the number of tourists to Japan.
Separate data showed Japanese retail sales rose 1.9%, stronger than expected in January compared to the previous month, with apparel and automobiles leading the increase in activity.
The mixed set of results suggests that the central bank will be cautious in moving forward with hawkishness as the path of Japan’s recovery remains unclear. During the second day of parliamentary hearings, Ueda said it was appropriate to maintain monetary easing. The candidate for the presidency of the Bank of Japan will take office from April if approved.
“Under these economic conditions, Ueda will proceed with caution,” said economist Takeshi Minami of the Norinchukin Research Institute. “I don’t think he will take such big steps as deregulating the yield curve, and he will watch carefully whether prices fall as expected.”
