World Economy

Japan's retail sales, industrial output paint mixed picture

Gary Conner | Getty Images | Getty Images

Japan's economy offered a mixed reading Monday, with retail sales for May beating expectations while industrial production disappointed.

Industrial output fell 2.2 percent on month in May, worse than a Reuters poll forecast for a 0.8 percent decline. That spurred the government to say industrial production is stagnating and cut its forecast, according to Reuters.

"The plunge in industrial production in May points to a contraction in gross domestic product (GDP) this quarter," Marcel Thieliant, a Japan economist at Capital Economics, said in a note Monday. "The Bank of Japan will have to step up the pace of easing before too long."

But Japan's consumers have stepped up to the plate, with retail sales rising 3.0 percent on year in May, beating a forecast for a 2.3 percent rise from a Reuters poll. That's consistent with data released last week showing household expenditures climbed more than expected in May.

Japan's policymakers have struggled to kick start the economy after decades of deflation, with the Bank of Japan launching a massive easing program in 2013 as part of "Abenomics," Japanese Prime Minister Shinzo Abe's plan to return the country to growth.

But after a consumption tax hike to 8 percent from 5 percent in April of 2014, the economy got clobbered when consumers stopped spending, forcing the government to postpone a second sales tax initially due this October.

—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1