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Japan Retail Sales Growth Slows Sharply; Factory Output Accelerates

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Japan Retail Sales Growth Slows Sharply; Factory Output Accelerates

Japan's economy delivered a mixed set of readings on Friday, with retail sales growth in June slowing far more than expected, while industrial output rose sharply, topping expectations.

The latest data complicates the economic picture for the Bank of Japan as it wraps up its policy meeting Friday.

Retail sales expanded 0.5% year over year in June to 13 trillion yen, decelerating sharply from the 5% jump recorded in the previous month. The latest print missed the consensus forecast of 3.1% growth tracked by Investing.com.

Meanwhile, industrial production rose 4.2% year over year, reversing the 2.1% drop the previous month. The recovery outpaced the Trading Economics forecast for a 1.8% expansion.

Japan's labor market also tightened further in June, with the active jobs-to-applications ratio rising to 1.18 in June from 1.17 in May. The data beat the 1.17 consensus compiled by Investing.com and equates to 118 job openings for every 100 applicants.

Overall, Japan's seasonally adjusted unemployment rate steadied at 2.5% in June, matching the month-ago print and the consensus forecast tracked by Investing.com.

Separately, Tokyo's headline consumer price index rose 2% year over year in July, accelerating from 1.7% in June and in line with Trading Economics' estimate. Core CPI, which excludes fresh food, rose 1.9%, up from 1.7% the prior month, while core-core inflation, which strips out both food and energy, quickened to 2% from 1.8%.

The economic indicators come as the BOJ concludes its policy meeting Friday, with the central bank widely expected to hold its benchmark interest rate at a 31-year high of 1% after a 25-basis-point hike in June.

ING economists Chris Turner and Padhraic Garvey wrote in a Tuesday note that the BOJ had kept a tightening bias after the June hike, concluding that "a further removal of monetary accommodation would be required."

They added that despite acknowledging downside risks from the Middle East conflict, most expect the central bank to stick with its view that AI-related capital spending is supporting global demand.

"This probably means there will not be too many changes to the BoJ's forecast for modest GDP increases when it publishes its latest Outlook Report on Friday," they wrote.

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