Japan's industrial output rose 0.5 percent on month in May, below expectations in a Reuters poll for a 0.9 percent rise but up from April's 2.5 percent decline.
"The 0.5 percent gain is better than our expectations," Junko Nishioka, chief economist at RBS Securities Japan said on CNBC Asia's "Squawk Box". "I think the Japanese economy is getting out of its economic contraction after the sales tax hike in April. I think it is quite fair to say that business activity will gain momentum from the second half of this year."
Manufacturers see June output down 0.7 percent on month versus their previous forecast of a 2 percent decline, according to Japan's Ministry of Economy, Trade and Industry. For July, manufacturers see output up 1.5 percent on month.
"1 to 1.5 percent growth rate is maximum for Japanese growth momentum. Abenomics and the Bank of Japan have been very proactive in taking additional action to boost business sentiment in domestic markets," Junko added.
The Japanese yen was flat at 101.4 per dollar following the data release. Japan's Nikkei opened 0.4 percent higher shortly after the data release.