Japan Posts Mixed October Data as Tokyo Inflation Holds Above BOJ Target and Industrial Output Surges

A wave of Japanese economic data released on October 30 painted a mixed picture of the economy, with Tokyo inflation remaining above the Bank of Japan's 2% target, industrial production beating expectations, but retail sales falling short of forecasts. Tokyo's overall CPI rose 2.8% year-on-year in October, above the 2.7% estimate and matching the prior month's pace. Core CPI, which strips out fresh food, came in at 2.6%, in line with forecasts but easing slightly from September's 2.7%. CPI excluding both fresh food and energy also printed at 2.6%, below the 2.7% estimate and down sharply from a revised 2.9% in September.

Industrial production delivered the clearest upside surprise, rising 2.2% month-on-month in September against a median forecast of 1.2%, marking the first monthly gain in three months. On a year-on-year basis, output climbed 1.9%, well above the median forecast of 0.9% and representing a fourth consecutive annual increase, though August's reading was revised down to 2.7% from an initial 3.4%. Manufacturers' forward-looking production forecast for October pointed to a further 5.1% monthly gain, up sharply from a prior estimate of 3.2%.

Retail sales disappointed, rising just 2.3% year-on-year in September versus a 3.3% consensus estimate, and falling 0.7% month-on-month against an expected 0.3% gain. Large-scale retail sales rose 2.0% annually, doubling the prior reading of 1.0%, while department store and supermarket sales increased 1.7% year-on-year. On the labor market, Japan's unemployment rate ticked down to 2.4% in September from 2.5%, beating the 2.5% forecast, and the jobs-to-applicants ratio edged up to 1.19 from 1.18.