Japan's industrial output rose unexpectedly in October, underscoring the view that the economy remains on course for steady expansion and boosting expectations for a near-term rate hike by the Bank of Japan.
The yen rose against the dollar and the euro on the stronger-than-expected output figure while benchmark euro/yen futures slipped, but some economists remain wary about a rise in inventories in the information-technology sector.
Industrial production in October rose 1.6 per cent from the previous month, the Ministry of Economy, Trade and Industry (METI) said, beating a market consensus forecast for a 0.5 per cent decline.
The output index stood at 107.8 in October, the highest since 1978 when comparable monthly data started, a ministry official said. The advance was led by robust demand for general industrial machinery including semiconductor manufacturing equipment.
"Up until last month, production data had suggested it was peaking out, but the latest data shows that the underlying trend of strong production remains intact. The data is very good," said Takeo Okuhara, a bond strategist at Daiwa Institute of Research.
In July, the Bank of Japan raised key interest rates for the first time in six years. The central bank has kept its monetary policy unchanged since then. Just after the data was released, the yen strengthened to 116.08 to the dollar from 116.28.