(MENAFN- AFP) Japan's factory output and inflation rate slowed in November, official data showed on Friday, dealing a fresh challenge for Tokyo's bid re-boot the economy, just days after pro-business prime minister Shinzo Abe was re-elected following a snap election.
The weak figures raised the prospect of further easing by the Bank of Japan as its ambitious 2.0 percent inflation target, aimed at ending years of tepid growth, appears increasingly out of reach.
The bank's move in late October to expand its massive asset-buying plan, which now stands at about 80 trillion yen ($670 billion) annually, sharply weakened the yen and stoked a stock market rally.
Japan slipped into recession during the third quarter as an April sales tax rise slammed the brakes on growth in the world's number three economy, and the impact of the additional easing has now "completely gone", according to SMBC Nikko Securities.
Worse, Japan's core inflation rate could dip into negative territory soon as a drop in crude oil prices weighs on efforts to boost prices and slay deflation.
"It depends on US employment data and crude oil prices, but the BoJ could go ahead with a stunning additional easing as early as January," SMBC said in a note.
On Friday, official data showed that industrial production contracted 0.6 percent in November from the previous month, reversing two months of rises and missing a market forecast for a 0.8 percent increase.
"Industrial production fluctuates indecisively," the industry ministry said in a monthly report, leaving unchanged its overall assessment despite the downturn.
Separate data from the internal affairs ministry showed core inflation, excluding volatile prices of fresh food, slowed to 2.7 percent from 2.9 percent in October.
Prices had been on the rise largely because due to the sales tax rise from 5.0 percent to 8.0 percent on April 1, which drove up retail prices.
Adjusted for the tax increase, Japan's core consumer-price index rose 0.7 percent from a year earlier in November, the lowest since September 2013 and falling further behind the BoJ's inflation target.
The internal affairs ministry on Friday also said household spending fell 2.5 percent year-on-year in November while the jobless rate was unchanged at 3.5 percent.
Millions of shoppers launched a last-minute buying binge on everything from cars and washing machines to televisions and alcohol, before the levy hike earlier this year. But spending dived after the increase, throwing Japan into economic contraction and prompting Abe to delay another sales tax rise next year.
The tax rises are aimed at paying down Japan's enormous national debt, but they have put Abe in a tricky position as he tries to balance them with his pro-spending growth plan, dubbed Abenomics.
This week, Japan's parliament overwhelmingly voted to return the 60-year-old premier to power, after he called for a snap election had billed as a referendum on his economic policies.
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