Japan's factory output rose at a better than expected pace last month, but cooling retail sales growth and a slowdown in production expected by manufacturers in the near term pointed to the growing strains for an economy facing rising external risks.
Japan's factory output rose by 0.8% in October, surpassing expectations and marking a recovery from a 1.5% drop in September. Despite this increase, the economic outlook remains cautious due to several factors. Retail sales growth slowed to 4.2% year-on-year in October from 6.2% in September, indicating a cooling in consumer spending. Additionally, the manufacturing sector faces challenges from a global economic slowdown, particularly with reduced demand from China, Japan's largest trading partner. The weakening yen, while beneficial for exporters, also raises concerns about inflation and the cost of living. Analysts are concerned about the sustainability of this recovery, with potential risks including a global economic downturn, ongoing supply chain issues, and geopolitical tensions. The government and the Bank of Japan are closely monitoring these developments, with expectations of continued support for the economy through monetary policy adjustments.
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