Japan’s factory output slumped in July as U.S. tariffs bite and a leading indicator of nationwide inflation slowed, data showed on Friday, complicating the central bank’s decision on the next rate-hike timing.
While Japan’s jobless rate hit a multi-year low in July due to a tight job market, retail sales rose much less than expected in a sign rising living costs were weighing on consumption.
Signs of persistent inflationary pressure and downside risks to growth highlight the challenge the Bank of Japan (BOJ) faces in determining how soon to resume interest rate hikes.
"Sticky inflation is eroding wage gains, keeping consumer spending weak," said Stefan Angrick, head of Japan and Frontier markets Economics at Moody’s Analytics.
"The poor run of data will keep the Bank of Japan on hold until year’s end. Japan’s manufacturers will stay stuck in the doldrums, with few clear sources of support."
Industrial output fell 1.6% in July from the previous month, government data showed, more than a median market forecast for a 1.0% drop, due partly to a 6.7% decline in automobile production.
Manufacturers surveyed by the government expect output to grow 2.8% in August before dipping 0.3% in September.
While the bilateral trade agreement in July is likely to lower U.S. tariffs on Japanese automobiles to 15%, there is uncertainty on when the cut will apply as President Donald Trump has yet to sign an executive order.
Source : Investing.com