Japan August manufacturing disappoints, but tax hike will proceed

TOKYO - Industrial production in Japan declined by 0.2% y/y in August from a 1.8% y/y increase in July, as automobile makers cut production due to sluggish demand following expiry of the Government's car purchasing incentives last year. BBVA Bank says the disappointing data may raise doubts about the sustainability of Japan's economic pickup after a strong expansion in the first half on aggressive monetary and fiscal stimulus measures.

“Nevertheless, manufacturing PMI released today for September (52.5 vs. 52.2 in August) and retail sales for August (1.1% y/y vs. -0.3% y/y in July), may help to alleviate such concerns. Japan's Prime Minister Abe is to announce his decision tomorrow to proceed with a planned sales tax hike accompanied by some offsetting short-term stimulus measures.” www.bbvaresearch.com (ATI).