Japan's industrial production shockingly falls by 1.5% MoM

Drifting from consensus by a wide margin.

Japan's August data came out recently and were mixed, with industrial production falling unexpectedly by -1.5% (MoM sa), deviating from the consensus forecast of 0.2% by a wide margin.

According to a research note from DBS, however, on the other hand, retail sales increased more than expected by1.9% in Aug (consensus: 0.5%), the biggest gains over three months.

The poor results in industrial production data should reflect the sluggishness in Japan’s exports to a large extent.

Here's more from DBS:

By contrast, domestic consumption demand and services sector activity have started to recover after being hit hard by the sales tax hike in 2Q, although the recovery has remained incomplete thus far.

Overall, Aug data still support the case that the 3Q GDP growth will rise about 2% (QoQ saar), a payback from -7% in 2Q.

Chances remain high that the BOJ will downgrade the FY2014 GDP forecast during its upcoming review on Oct 31st.

A revision to 0.5% will be necessitated, notably down from 1.0% currently.