The Bank of Japan may confound the chorus of analysts calling for further easing at its policy meeting Friday after industrial production data Thursday came in better than expected.
With the central bank's inflation target of 2 percent by the middle of next year still looking tough to hit and much of Japan's other economic data painting a mixed picture, expectations have grown that the BOJ would step up its already massive quantitative easing (QE) program on Friday.
The program, currently calling for the central bank to increase its monetary base by 80 trillion yen ($662 billion) annually, was launched in 2013 as the first "arrow" of Abenomics, or Prime Minister Shinzo Abe's plan to push Japan's economy out of its decades-long deflationary slump.
But data released Thursday showed factory output rose 1.0 percent in September from the previous month, topping a Reuters poll forecast for a 0.5 percent drop and reversing August's 1.2 percent fall.
"The rebound in industrial production in September and upbeat forecasts for the fourth quarter have reduced the chances that the Bank of Japan will announce more easing," Marcel Thieliant, a Japan economist at Capital Economics, said in an email Thursday. That's a turnaround from a research note he published Monday, saying an announcement of more stimulus was likely as the BOJ was also likely need to postpone its timeframe for hitting its inflation target for a third time.