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Japan industrial output above view in October

AID | Gettty | Getty Images

Japan's industrial production and retail sales figures exceeded expectations in October, signalling a tentative recovery in demand as businesses and consumers continue to adjust to the April sales-tax hike.

Industrial production rose 0.2 percent on month in October, above expectations for a 0.6 percent decline in a Reuters poll but down from September's 2.7 percent increase. Meanwhile, retail sales rose 1.4 percent on year, above expectations for a 1.2 percent rise but slower than September's 2.3 percent increase.

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In April, the government raised the consumption tax to 8 percent from 5 percent to rein in the country's budget-to-GDP ratio. It was the first tax hike in 17 years.

The Japanese economy struggled to deal with the tax hike's impact on demand, prompting markets to call on the Bank of Japan to pursue fresh stimulus measures. At the end of October the central bank did just that, expanding its already massive stimulus in an effort to re-energize a fragile economic recovery.

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"The additional round of quantitative easing was only introduced on Halloween, so we haven't yet seen the impact of that coming through yet," said Alex Treves, Head of Equities, Japan at Fidelity Worldwide Investment. "Let's wait and see what happens."

In November, data showed the economy tipped into a technical recession in the third quarter, leading Prime Minister Shinzo Abe to call snap elections to gain a fresh mandate for Abenomics - the economic policies that he introduced in 2013 to kickstart Japan's long-moribund economy. Abe also delayed a second sales-tax hike, initially scheduled for October 2015, by 18 months.

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Manufacturers boosted their forecasts for November output to 2.3 percent on month from 1.0 percent previously, according to the Ministry of Economy, Trade and Industry. For December, manufacturers see output increasing 0.4 percent on month.