* Aug factory output down 0.7 pct vs f'cast -0.4 pct
* Retail sales up 1.1 pct, consumption sustains momentum
* Data signals economy remains on track for recovery
* PM Abe to unveil stimulus, decide on sales tax hike
By Tetsushi Kajimoto and Stanley White
TOKYO, Sept 30 Japan's industrial output slid
0.7 percent in August after a hefty gain in the previous month,
but analysts see factory activity and the broader economy on
track for a steady recovery backed by exports and firm domestic
A separate survey showed manufacturing activity expanded in
September at the fastest pace since the March 2011 earthquake,
underscoring the strength of the world's third-largest economy.
Retail sales also rose 1.1 percent in August from a year
earlier, data showed on Monday, in a sign consumer spending is
The data is unlikely to change expectations for Prime
Minister Shinzo Abe to decide this week on the planned sales tax
hike, the biggest effort by Japan in decades to fix its tattered
"Factory output is a bit weak now but will return to levels
before the March 2011 earthquake around October. Companies are
starting to produce more and aren't too worried about
uncertainties in the overseas economy," said Takeshi Minami,
chief economist at Norinchukin Research Institute in Tokyo.
Abe - whose reflationary policies have boosted share prices,
weakened the yen and bolstered sentiment in the world's third
largest economy - is expected to make the sales tax decision
after confirming readings in a key Bank of Japan business
sentiment survey due 8:50 a.m. Tuesday (2350 GMT Monday).
The August drop in industrial output was smaller than a 0.4
percent decline projected in a Reuters poll, and followed a 3.4
percent gain in the previous month, data from the Ministry of
Economy, Trade and Industry (METI) showed.
Manufacturers surveyed by the ministry expect output to rise
5.2 percent in September and increase 2.5 percent in October,
the data showed.
The Markit/JMMA Japan Manufacturing Purchasing Managers
Index (PMI) rose to a seasonally adjusted 52.5 in September from
52.2 in the previous month, remaining above the 50 threshold
that separates contraction from expansion for the seventh month.
The survey showed that manufacturing activity expanded at
the fastest since February 2011, one month before the natural
disaster struck the country's northeast coast.
Japan's economy grew an annualised 3.8 percent in the second
quarter, driven in large part by strong consumer spending, and
the central bank upgraded its assessment of the economy earlier
this month to say it was recovering moderately.
The BOJ's quarterly "tankan" corporate survey will likely
show the headline index for big manufacturers' sentiment
improved three points from the previous quarter to plus 7,
according to a Reuters poll of 22 economists.