Japan's factories boosted output in September, data showed Wednesday, reversing a slide in the previous month owing to stronger domestic demand and highlighting that the world's third-largest economy is gathering steam.
Workers make final checks on Toyota's compact hybrid vehicle 'AQUA' on its assembly line of the Kanto Auto Works, Kanegasaki, on March 9, 2012
Industrial production rose 1.5 percent month-on-month, compared with a revised fall of 0.9 percent in August as demand among Japanese consumers for electronics and cars rose ahead of a sales tax hike next year.
Over the three months to September, the nation's plants expanded production by 1.8 percent.
Takeshi Minami, economist at Norinchukin Research Institute in Tokyo, said the data pointed to a recovery that is "continuing steadily", propped up by improving demand at home, while Japan's export picture remains tepid with unsteady demand overseas.
Bank of Japan (BoJ) policymakers will be poring over the latest data as it starts a two-day policy meeting that wraps up on Wednesday.
Markets are keen to see if the central bank would expand an aggressive monetary easing programme, unveiled in April, as they watch for signs its US counterpart was ready to start winding down its own stimulus drive.
Analysts widely expect the Federal Reserve to hold steady on its bond-buying programme in the absence of a firm recovery in the world's biggest economy.
The fresh Japanese production figures come after separate data Tuesday showed that the country's thrifty households boosted their spending last month while the unemployment rate fell.
The 3.7 percent on-year jump in spending -- the best result in six months -- far outstripped economists' expectations.
Japanese growth has easily outpaced expansion in other G7 nations this year and the government hailed recent consumer price data as showing it is winning the war on deflation.
The latest spending figures and a stronger labour market are key yardsticks for the success of Prime Minister Shinzo Abe's policy blitz, dubbed "Abenomics", aimed at stoking growth.
Stronger consumer spending was likely driven by expectations over a sales tax hike next year as consumers looked to buy goods more cheaply before the rate increase.
There are fears that the tax rise, designed to bring down Japan's staggering national debt, could derail its recovery.
But Tokyo has been under heavy pressure to reduce a debt mountain that is proportionately the heaviest burden among rich countries, at more than twice the size of the economy.
Abe has pledged to drag Japan out of its 15-year deflationary spiral by stoking price rises through lifting wages and consumption.
A producers' survey released with the industrial production figures on Wednesday showed manufacturers have mixed expectations over the coming months, forecasting a 4.7 percent output rise in October before a decline of 1.2 percent in November.
"The outlook for the manufacturing sector remains buoyant," London-based Capital Economics said in a note.
"While the October forecast will likely turn out too optimistic, there is a good chance that industrial production will finally return to the levels observed at the beginning of last year in the coming months."
Last week, Tokyo hailed a key inflation indicator touching a five-year high as proof its growth blitz was working.
Stripping out volatile fresh food and energy prices, which have largely driven recent increases, prices did not fall in September -- deflation-plagued Japan's best result since December 2008.
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