Although retail sales, a barometer of service-sector activity and consumer spending, rose more than expected, the faltering factory activity is ill-timed as companies face calls to hike wages to sustain Japan's post-pandemic recovery.
Industrial output fell 0.1% in December from the previous month, government data showed on Tuesday. The drop was less than the median market forecast for a 1.2% decrease and followed upwardly-revised 0.2% growth in November.
Outputs of items such as general machinery and metal products, which dropped 6.0% and 3.0%, respectively, dragged down the overall December index. Output of auto products was up 0.6%, posting first growth in two months.
Manufacturers surveyed by the Ministry of Economy, Trade and Industry (METI) expect output to remain flat in January and increase 4.1% in February, the data also showed, although the official poll tends to report an optimistic outlook.
Compared with the previous quarter, factory output fell 3.1% in October-December, the first drop in two quarters.
Japan's economy, after a surprise contraction in July-September, is expected to have expanded by an 3.0% annualised growth in October-December thanks to solid consumption, according to the latest Reuters poll.
(Reporting by Kantaro Komiya; Editing by Kim Coghill)
By Kantaro Komiya
