Japanese industrial output unexpectedly fell in September from August, adding to evidence that manufacturers were becoming cautious amid signs that demand for exports was cooling and the economic recovery was slowing.
Production was down 0.7 percent in September after a 0.1 percent gain in August, government data showed on Thursday. The September figure was much worse than a median forecast of a 0.5 percent rise in a Reuters poll last week.
"The industrial production figure is significantly below expectations. It basically seems to reflect weakness in exports, which look to have been down pretty sharply in the month," said Peter Morgan, senior economist at HSBC Securities.
Output was also hit by inventory adjustments in the electronics sector as well as weather factors, such as the typhoons that swept across the country last month.
The Ministry of Economy, Trade and Industry (METI) downgraded its assessment to say industrial output was flattening.
Output for July-September fell 0.8 percent from the previous three-month period, the first decline in five quarters and the biggest fall since a 2.6 percent drop in October-December 2001.
"It looks like the weakness in the high-tech sector is dragging down output. It looks like demand for high-tech goods is soft around the world," said Takeshi Minami, chief economist at Norinchukin Research Institute.
"Export growth is slowing, and even demand in China is losing momentum. Having said that, September figures were probably skewed by special factors like the typhoons, so you have to see how it goes in the following months to get a better picture."
METI remains optimistic. It expects manufacturers' output - the core component of production - to rise 0.9 percent in October and 1.6 percent in November.
Separate data showed retail sales fell 0.3 percent in September from a year earlier as consumers shopped less for clothing and food, suggesting domestic demand remained fragile.
The figure was better than the 2.1 percent decline forecast by economists last week and a 1.8 percent drop in August.
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