October 23, 2015 / 8:33 AM / 4 years ago

Weak Japan inflation, output data to cast cloud over BOJ meeting

TOKYO (Reuters) - Japan’s core inflation probably slipped for a second month in September, while factory output fell for a third month in a row, a Reuters poll showed, adding to headaches facing Bank of Japan policymakers as they head into a key policy meeting on Friday.

A woman buys eggs at a wholesale shop in Kawasaki, nearby Tokyo, January 11, 2011. REUTERS/Kim Kyung-Hoon

Private spending data also due next week is expected to show modest improvement, helped by holiday spending, but the rate of recovery likely remained moderate due to slow growth in wages.

The economic data next week will be among the last clues for investors and the BOJ on how the economy performed in July-September after it contracted in the second quarter.

Some economists believe activity shrank further over the summer, sending the economy back into recession and adding pressure on policymakers to offer fresh stimulus.

The core consumer price index (CPI), which includes oil products but excludes volatile fresh food prices, is expected to have slipped 0.2 percent in September from year earlier, a poll of 22 analysts showed.

That would mark a second straight monthly fall after a 0.1 percent dip in August.

Industrial production likely declined 0.5 percent in September from the previous month, which would be a third straight monthly fall following a revised 1.2 percent drop in August and a 0.8 percent fall in July.

“Japan’s exports are weak not only to Asian nations but globally. Along with that, factory output also deteriorated,” said Taro Saito, director for economic research at NLI Research Institute.

“That said, the economy overall is not going to tumble at the moment as jobs-related data remain solid and consumer spending is also moving sideways, although it lacks strength.”

The jobs-to-applicants ratio likely improved to 1.24 in September, which would be the highest since January 1992 when the ratio was at 1.25, according to the poll. In August, the ratio was at 1.23.

The unemployment rate probably stayed at 3.4 percent last month.

The poll also showed household spending rose 1.2 percent in September from a year earlier, up for a second straight month after a 2.9 percent growth in August.

The internal affairs ministry will announce core CPI, jobs data and household spending at 8:30 a.m. on Oct 30, hours before the BOJ issues its policy decision.

Retail sales on Wednesday will likely show a 0.4 percent rise in September from a year ago, up for a fifth straight month but slowing from 0.8 percent growth in August.

The Bank of Japan will cut its growth and inflation outlook for this fiscal year at its rate review but only slightly tweak its projections for next year, sources told Reuters, possibly tempering expectations that it will ease monetary policy again any time soon.

Editing by Kim Coghill

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