Japan's household spending suffered the biggest annual fall in nearly a year in December and factory output slumped more than expected, renewing pressure on the central bank to ease policy further to support a fragile economic recovery.
The data comes as the Bank of Japan's two-day rate review continues on Friday, where policymakers will debate whether volatile markets and slowing global growth have heightened risks enough to warrant immediate action.
While many central bankers would prefer to stand pat, Friday's batch of weak data casts doubt on their argument that Japan's underlying price trend is improving against the background of a solid economic recovery.
"The economy isn't doing well and there is a strong chance the economy shrank in October-December. If so, that will keep downward pressure on prices," said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.
Household spending fell 4.4 percent in the year to December, exceeding market forecasts for a 2.4 percent drop, data by the Internal Affairs Ministry showed on Friday.