Japan's industrial output and household spending fall

A worker in a Japanese factory Japan's manufacturers have seen a decline in demand from key markets

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Japan has posted weaker-than-expected economic data, underlining the challenges the government faces as it tries to revive the country's economy.

Industrial output fell 3.3% in June, from the previous month. Compared with the same month a year ago it fell 4.8%.

Meanwhile, household spending declined 0.4% from a year earlier. Analysts had expected growth of 1.0%.

Japan has been trying to boost domestic consumption in an attempt to revive its stagnant economy.

Analysts said that while the data was weak and highlighted the challenges faced by the government, it was not a cause for immediate concern.

"This is a minor blip, the overall trend is that of a recovery in Japan's economy," Masaaki Kanno, Japan chief economist with JP Morgan Securities told the BBC.

Domestic boost

Start Quote

I think there is no change in the trend that production is expected to stay on a steady recovery ”

End Quote Yoshiki Shinke Dai-Ichi Life Research Institute

Prime Minister Shinzo Abe's government has unveiled a series of aggressive measures to boost domestic demand, which has been hurt in part by years of falling prices or deflation.

While falling consumer prices may sound good, they tend to hurt the economy as consumers and businesses put off big purchases in the hope of getting a better deal later on.

Policymakers and analysts have said that ending the deflationary cycle is key to reviving Japan's economy.

Earlier this year, the central bank doubled its inflation target to 2% in an attempt to boost consumer prices and spending.

There have been some indications that the steps are having an impact as data released last week showed that consumer prices rose in June, for the first time in more than a year.

Temporary decline?

The decline in Japan's factory output was also bigger than forecast.

However, analysts said that the fall was likely to be temporary and predicted that production would jump in the coming months,

"Although June data for factory output was weak, manufacturers' forecasts for July are strong," said Yoshiki Shinke, chief economist at Dai-Ichi Life Research Institute.

"I think there is no change in the trend that production is expected to stay on a steady recovery as June trade data was good, benefits from the yen's weakness are appearing and domestic demand is solid."

According to a survey conducted by Japan's Ministry of Economy, Trade, and Industry (METI), manufacturers expect production to rise by 6.5% in July.

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