Japan Industrial Production, Retail Sales Blow Past Expectations

By Ambar Warrick

Investing.com-- Japanese industrial output blazed past expectations in August, data showed on Friday, as strength in the production of industrial machinery and refined chemicals helped offset a slowdown in the country’s major automobile sector.

A separate reading showed that Japanese retail sales also grew more than expected in August, as strength in the labor market ensured that consumer spending remained resilient despite headwinds from rising inflation and a weakening yen.

Industrial production rose 2.7% in August from the prior month, beating expectations for growth of 0.2%. The reading marks the third consecutive month of industrial growth for Japan after the relaxing of COVID-related curbs earlier this year.

A survey by the Ministry of Economy, Trade and Industry forecast production to rise 2.9% in September and 3.2% in October.

Japanese factories have ramped up spending in recent months on expectations that headwinds from high inflation and a global economic slowdown will ease towards the year-end. Export-oriented industries have also benefited greatly from a weakening yen, which is trading around 24-year lows.

Shipments by Japanese industries rose 1.9% in August, boosted primarily by automobile exports and industrial machinery. But production in electronics and automobiles declined in August due to an ongoing chip shortage.

Japanese retail sales jumped 4.1% in August from last year, beating expectations for growth of 2.8% and July’s reading of 2.4%.

Steady employment levels appeared to be the biggest factor behind the reading, as data showed Japanese unemployment remained steady at 2.5% in August. Japanese wages have also grown steadily this year.

Consumer spending in the country, particularly on items such as apparel and merchandise, has persevered this year despite headwinds from rising inflation.

Friday's data shows that certain facets of the world's third-largest economy remain resilient despite high inflation and a weakening yen. Japan is struggling with a spike in commodity prices this year, which has made its energy exports significantly more expensive and ramped up inflation, which is at a near eight-year high.

Still, the Bank of Japan has given no indication that it intends to tighten monetary policy, given that ultra-low interest rates and an accommodative stance have largely supported the economy for the past two years.

The yen was little changed after the data, trading near 24-year lows at 144.45 to the dollar.