Japan's factory output rebounds in September

Yoshikazu Tsuno | AFP | Getty Images

Japan's industrial output rose 1.5 percent in September from the previous month, official data on Wednesday showed.

The figure was lower than a Reuters forecast for a 1.8 percent increase, but was still a bounce from the 0.9 percent decline in August.

The government also raised its assessment of output for the first time in six months.

(Read more: Is Japan finallydefeating its deflation demons?)

Japan: Economic recovery or false dawn?

Manufacturers remained cautiously optimistic going forward, expecting output to rise 4.7 percent in October but decline 1.2 percent in November, according to a survey by the government.

The yen was little changed after the data; dollar-yen traded at around 98.19 mid-morning in Tokyo.

The figures come on back of much better-than-expected retail sales and household spending data on Tuesday, which analysts attribute to the aggressive economic policies by Prime Minister Shinzo Abe, widely known as 'Abenomics,' rolled out earlier this year to revive the economy.

(Read more: Japan retailsales, household spending beat forecasts)

But Paul Gambles, managing partner of MBMG International, said the policies, much like the quantitative easing (QE) undertaken by the Federal Reserve in the U.S., will do more harm than good to Japan's economy in the long run .

"What it will do is put too much money trapped in corporate balance sheets," Gambles told CNBC on Wednesday.

"If any of the [Fed] QEs worked well, it was QE 1 for a short period of time. Since then, the QEs have clearly had a very negative effect on the economy, and I think we are going to be in the same boat with 'Abenomics' – everybody will be cheer-leading it for a few more months and maybe into next year, but at some point it will become more of a drag than a stimulus," he added.

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