Industrial production decreased by 0.1% quarter-on-quarter in the third quarter, primarily due to reductions in output related to US tariffs. Transportation equipment and iron/steel output declined in September, likely due to the lingering effects of US tariffs. Still, the recent easing of tariff tensions in several countries should support Japan’s production rebound in the coming months. Semiconductor equipment sales rose for a second consecutive month, suggesting that strong global chip demand continued. Meanwhile, retail sales rebounded 0.3% MoM in September, but missed the market consensus of 0.8%.
Both IP and retail sales fell in Q3, indicating a GDP contraction for 3Q25. However, a rebound in September points to a gradual economic recovery in the current quarter.
The BoJ cited trade uncertainty as the reason for pausing rate hikes yesterday. However, today’s data indicates a possible economic recovery that could support future rate hikes.
Today’s data supports our view that the BoJ is likely to hike rates in December.