–US Tariffs Seen Denting Factory Output, Retail Sales Remain Weak
(MaceNews) – Here are the key Japanese economic events for the coming week.
In the final quarter of 2025, the drag from the protectionist U.S. trade policy is becoming more pronounced in some data including international trade, compared to the previous quarter.
This week the negative impact is expected to have caused a pullback in industrial production as the automobile and metals industries feel the pinch. The cooler to cold weather that replaced the heat wave is underpinning seasonal demand for clothing and heaters, giving retailers a relief. But the pickup in vehicle sales from the effects of the Toyota group output and shipment suspension over its safety check scandal in early 2024 seems to have run its course, limiting retail sales growth.
On the policy front, another Bank of Japan board member will speak to business leaders amid growing expectations that the bank will conduct its fourth rate hike during its normalization process, possibly in December or January. The BOJ leadership has been patiently waiting for a better timing for their rate action in the wake of the global trade war initiated by the Trump administration.
BOJ policymakers wish to keep the momentum of gradual rate hikes. The last rate hike was nearly a year ag, in January 2025, when the policy rate was raised to 0.5%. It followed a hike to 0.25% in July 2024 and the bank’s first rate increase in 17 years in March 2024, which ended its seven-year-old yield curve control framework and lifted the overnight interest rate target to a range of zero to 0.1% from minus 0.1%.
Asahi Noguchi, a former economics professor, is expected to revisit his theme of the need for the BOJ to adjust its still accommodative policy stance, one of points that he made in late September. This follows a speech by Junko Koeda, also with academic background, who called for the need to “proceed with interest rate normalization.”
On the weekend, the Jiji news agency published an interview with Kazuyuki Masu, a board member with experience in the business world, who said “the conditions are set” for a rate hike given the current growth and inflation climate, arguing that the board could see the trend for fiscal 2026 wage-setting moves among major firms before March when the first round of labor-management talks is done.
– Wednesday, Nov. 26
TBA – The Cabinet Office releases the government’s monthly economic report shortly after the economic ministers’ meeting ends, which is sometime between 1700 JST (0800 GMT/0300 EST) and 1830 JST (0930 GMT/0430 EST). It is rare but the ministers and the representative from the Bank of Japan (usually the governor) may meet around 0800 JST (2300 GMT/1800 EST the previous day) when the Diet is in session.
The government is expected to maintain its overall view, saying the economy is “recovering at a moderate pace, although the effects of the U.S. trade policy are seen mainly in the auto industry.” The official assessment was last upgraded in August 2024 and downgraded six months earlier.
– Thursday, Nov. 20
1030 JST (0130 GMT Thursday, Nov. 20/2030 EST Wednesday, Nov. 19) Bank of Japan board member Asahi Noguchi, a former economics professor at Senshu University, delivers a speech to a business audience in Oita City, southwestern Japan. He will hold a news conference in the afternoon. His five-year term ends on March 31, 2026.
The focus is on his latest balance of risk analysis. In his last outreach speech, in the northeastern city of Sapporo on Sept. 29, Noguchi call for a “flexible” adjustment of the bank’s still accommodative monetary policy. He urged his fellow policymakers to watch for upside risks to growth and inflation because the labor market appears to be “close to full employment” and that the output gap is estimated to be closed.
“When focusing only on the domestic economic situation, I believe Japan will, in the not-too-distant future, require a new policy perspective that addresses the upside risks,” he said in the speech. “On the other hand, as Japan’s economy faces significant downside risks stemming from the U.S. tariff policy, it is necessary that the bank assess underlying inflation as carefully as possible for the time being.”
The event follows a speech by board member Junko Koeda, a former economics professor at Waseda University, in the northeastern city of Niigata. Koeda said given real interest rates are estimated to be significantly low, the bank “needs to proceed with interest rate normalization” to avoid unintended distortions. She believes “underlying inflation is about 2%.”
Noguchi has voted for leaving the policy rate at 0.5% at each of the six meetings after the board decided to raise the rate by 25 basis points (0.25 percentage point) in January. At the bank’s latest meeting on Oct. 29-30, the board decided in a 7 to 2 vote to maintain the target for the overnight interest rate at 0.5% for the sixth straight meeting amid uncertainty over the emerging effects of the protectionist U.S. trade policy, geopolitical risks and financial markets. The majority of the board also wanted to see the stimulus effects of an economic revival package planned under Prime Minister Sanae Takaichi who took office on Oct. 21.
– Friday, Nov. 28
0830 JST (2330 GMT/1830 EST Thursday, Nov. 27) The Ministry of Internal Affairs and Communications releases November Tokyo CPI.
Mace News median: total CPI +2.8% y/y (range: +2.6% to +3.0%) vs. Oct +2.8%; core CPI (ex-fresh food) +2.8% (range: +2.7% to +3.0%) vs. Oct +2.8%; core-core CPI (ex-fresh food, energy) +2.8% (range: +2.6% to +2.8%) vs. Oct +2.8%
Consumer inflation in Tokyo, a leading indicator of the national trend, is expected to be stable at 2.8% in all three measures in November following a three-tick jump in October that was caused by the Tokyo metropolitan government’s move to wrap up its four-month program to wave base charges for water supply during the heat wave at the end of September as planned.
The one-off 0.24 percentage point surge in water bills’ contribution to total CPI in October vs. September’s, combined with the effect of higher hotel charges, far more than offset slightly negative gaps in energy (-0.02 point) and processed food (-0.03 point) between October and September.
The November Tokyo CPI report should see zero y/y contribution from water charges and nearly effects of other utilities.
Bank of Japan board members have been monitoring various data to see whether the much sought-after pickup in services costs reflecting wage hikes will become sustainable and replace sticky goods inflation as the main driver of stable 2% inflation in the long run. Consumer inflation has been driven mainly by protracted domestic rice supply shortages and higher import costs amid the weak yen.
– Friday, Nov. 28
0830 JST (2330 GMT/1830 EST Thursday, Nov. 27) The Ministry of Internal Affairs and Communications releases October jobs.
Mace News median: 2.5% (range: 2.5% to 2.7%) vs. 2.6% in Sept, 2.6% in Aug, over 5-year low of 2.3% in July, 2.5% from March to June
Japanese payrolls are expected to post their 39th straight rise on year in October amid persistent labor shortages in many sectors.
The seasonally adjusted unemployment rate is forecast to remain low and stable, easing to 2.5% from 2.6% in September, when the number of the unemployed rose on year for the second straight month. A surge in job cuts and retirements pushed the rate up to 2.6% in August and hitting a more than five-year low of 2.3% in July.
The jobless rate moved in a tight 2.4% to 2.5% range in the first half of the year. The 2.3% rate in July is the lowest since 2.2% recorded in December 2019 in the early phase of the pandemic.
The government continues to describe employment conditions as “showing signs of improvement” in its latest monthly economic report for October (unchanged since upgrading its view in June 2023). Wage growth has lagged behind sticky inflation at 2.8%.
Real wages posted the ninth straight year-on-year drop in September, down 1.4%, dipping 1.7% in August while total nominal wages rose at around the trend pace of 1.9% after rising 1.3% in the prior month (base wage gains have been more stable at around 2.0%).
– Friday, Nov. 28
0850 JST (2350 GMT/1850 EST Thursday, Nov. 27) The Ministry of Economy, Trade and Industry releases October industrial production, outlook for November and December.
Mace News median: -0.8% m/m (range: -1.3% to +0.6%) vs. Sept. revised up to +2.6% from +2.2%; -0.5 y/y (range: -1.2% to +0.7%) vs. Sept revised up to +3.8% from +3.4%
Japan’s industrial production is projected to fall 0.8% on month for an eighth decline in 12 months and a sixth this year, underscoring the drag from stiff Trump tariffs on autos and metals. It would follow a 2.6% rise in September, which was its first gain in three months.
Trade data showed last week that Japan’s export values posted the second straight in October, up 3.6% on year, as the European economy continues picking up and Chian is slowly crawling out of the doldrums caused by its property market problems. By contrast, export volumes were down for 3rd straight month (-1.2% y/y), hit by the protectionist U.S. trade policy.
The monthly survey by the Ministry of Economy, Trade and Industry released last month indicated that output dip 0.5% in October before slipping a further 0.9% in November as the impact of trade rows becomes more apparent in the fourth quarter.
Last month, the ministry repeated that industrial output was “taking one step forward and one step back.” The last change was made in the July 2024 report, when it upgraded its view.
From a year earlier, factory output is also expected to slip back, by 0.5%, after marking the first increase in three months, up a solid 3.8% in September.
– Friday, Nov. 28
0850 JST (2350 GMT/1850 EST Thursday, Nov. 27) The Ministry of Economy, Trade and Industry releases October retail sales.
Mace News median: +1.1% y/y (range: +0.4% to +1.5%) vs. Sept revised down to +0.2% from +0.5%; +0.3% m/m (range: +0.1% to +1.0%) vs. Sept revised down to 0.0% from +0.3%
Japanese retail sales are forecast to have risen 1.1% on year for a second straight increase after edging up a downwardly revised 0.2% in September but the pace of increase has been much slower than in the first four months of year. Demand for drugs and cosmetics remains strong and cooler weather appears to have supported clothing sales. On the downside, fuel prices have been sliding and demand for vehicles remains sluggish, limiting overall retail sales growth.
The supply side data posted its first drop in 41 months (-0.9%) in August, when the dangerously hot and humid weather kept many people inside homes and offices during the day.
Industry data due on Tuesday, Nov. 25 was expected to show that department store sales recorded a third straight year-on-year increase in October, backed by demand for autumn and winter clothing. The “general merchandise” category in retail sales data, however, marked its eighth year-on-year decline in September (-2.2%) as it includes sales at both department store chains and supermarkets.
On the month, retail sales are expected to show a 0.3% rise on a seasonally adjusted basis after being flat (revised down from an initial 0.3% gain) in September and falling for two months.
Last month, the Ministry of Economy, Trade and Industry downgraded its assessment for the first time in four months, saying retail sales “have a weak undertone.” Previously, it had said sales were “taking one step forward and one step back.”