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Japan December factory output seen up as exports pick up, household spending weak

By Kaori Kaneko

By Kaori Kaneko

TOKYO (Reuters) - Japan's factory output is expected to rise for a second straight month in December, supported by signs of a global manufacturing recovery, a Reuters poll showed.

Economists polled by Reuters also expect retail sales rose for a second straight month in December, but see household spending falling for the 10th straight month, showing consumer spending remains sluggish.

While mixed, the data is expected to reinforce the market view that the Bank of Japan will hold off on expanding monetary stimulus in coming months amid signs that the economy may be slowly regaining its footing.

Industrial production likely rose 0.3 percent in December from the previous month, the Reuters poll of 21 analysts found, slowing from a 1.5 percent gain in November.

"Exports are picking up on the back of the overseas economic recovery, which gives positive spillover effects to production activity. As a results, an inventory adjustment has progressed in the past several months," said Takeshi Minami, chief economist at Norinchukin Research Institute.

"There is a risk of protectionism trade policy but I think the recovering trend in the factory output is likely to continue for a while as the global economy is recovering."

A preliminary private survey earlier this week showed Japanese manufacturing activity expanded in January at the fastest pace in almost three years as export orders surged.

The trade ministry will announce factory output at 8:50 a.m. on Tuesday, Jan. 31 (2350 GMT, Jan 30).

Retail sales, which will be released on Monday by the trade ministry, likely rose 1.3 percent in December from a year ago, up for a second straight month.

But household spending was expected to have slipped an annual 0.6 percent, less than a drop of 1.5 percent in November but its 10th straight month of declines, the poll found.

"Stock price gains probably contributed positively to private spending but consumers' budget-minded manner persists, thus consumer spending lacked momentum," said Takumi Tsunoda, senior economist at Shinkin Central Bank.

The jobless rate is expected to have stayed steady at 3.1 percent in December and the jobs-to-applicants ratio likely improved to 1.42 last month, which would be the highest reading since July 1991 when the ratio stood at 1.44.

The internal affairs ministry will release household spending and jobs-related data at 8:30 a.m. on Tuesday.

The BOJ is expected to announce the outcome of its first policy review of the year later in the day.

(Reporting by Kaori Kaneko; Editing by Kim Coghill)

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