Japan's August industrial output in surprise 0.5% fall

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Robot assembler work on cars during the assembly process at Nissan Motor Company's Kyushu Plant on November 23, 2007 in Kiyakyushu, Japan.

Japan's industrial output unexpectedly fell 0.5 percent in August, down for the second straight month, government data showed on Wednesday, underscoring concerns about tepid factory activity.

The month-on-month fall compared with economists' median forecast for a 1.0 percent increase in a Reuters poll.

Manufacturers surveyed by the Ministry of Economy, Trade and Industry expect output to rise 0.1 percent in September and grow 4.4 percent in October, data showed.

Meanwhile, data released by the ministry at the same time showed retail sales rose 0.8 percent in August from a year earlier, compared with economists' median estimate for a 1.1 percent annual increase.

Speaking in New York overnight, Japanese Prime Minister Shinzo Abe said that more effort was needed to pull the world's third-biggest economy out of deflation.

Abe said his economic policies have improved jobs and incomes, while on the aim of reversing nearly two decades of falling prices, "We have come to the point where a bit more effort is required."

Abe last week vowed to raise gross domestic product by nearly a quarter to 600 trillion Japanese yen ($5 trillion), pledging to refocus on the economy after the passage of controversial security bills that eroded his popularity.

Read MoreAbe's new policy framework: More empty promises?

In his New York news conference, which followed an appearance at the United Nations General Assembly, Abe said the new "Abenomics" steps supplement the original "three arrows" of his policies - bold monetary easing, flexible fiscal stimulus and a growth strategy including structural reform.

- CNBC.com contributed to this report