Japan November factory output likely shrank on trade war impact - Reuters poll

By Leika Kihara

TOKYO (Reuters) - Japan's factory output is expected to have shrunk for the second straight month in November, according to a Reuters poll, highlighting the increasing strain on the export-reliant economy from the U.S.-China trade conflict and sluggish global demand.

Retail sales are also seen down in November as consumers tighten their purse strings after a sales tax hike that rolled out in October, the poll showed.

The data will likely keep the Bank of Japan under pressure to maintain its massive stimulus programme to prevent the economy from sliding into another recession, analysts say.

"There's no sign exports are bottoming out. Domestic demand also appears sluggish since the tax hike," said Takeshi Minami, chief economist at Norinchukin Research Institute.

Industrial output is expected to have fallen 1.4% in November from the previous month, the poll showed, which would follow a hefty 4.5% drop in October, the poll showed.

As well as the hit from the bitter global trade conflict, companies were still reeling from supply disruptions caused by typhoons that could take several more months to stabilise, analysts say.

Retail sales likely fell 1.7% in November from a year ago, the poll showed, casting doubt on the BOJ's view that robust domestic demand will make up for some of the weakness in exports and underpin a fragile economic recovery.

Both data are due out at 8:50 a.m. Japan time on Dec. 27 (2350 GMT, Dec. 26).

The poll also forecast the jobless rate at 2.4% in November, unchanged from the previous month. The data is due out at 8:30 a.m. Japan time on Dec. 27 (2330 GMT, Dec. 26).

The BOJ kept monetary policy steady on Thursday but offered a gloomier view on output than in October, underscoring its concern over increasing signs of weakness in overall growth.

Japan's economy, the world's third-largest, expanded an annualised 1.8% in the third quarter on resilient domestic demand and business spending.

But factory output suffered its largest fall in two years in October and big manufacturers' business sentiment sank to a near seven-year low in the fourth quarter.

Analysts expect the economy to have shrunk in the current quarter as the October tax hike cools consumption.

(Reporting by Leika Kihara; Editing by Shri Navaratnam)