debate on rates@ (Recasts story)
* Nov industrial output +0.6 percent vs forecast +0.5 pct
* Manufacturers see output +3.4 percent in Dec, -4.5 pct in Jan
* Retail sales +2.2 percent yr/yr vs forecast +1.2 percent
TOKYO, Dec 28 (Reuters) - Japan's best run of growth in a decade looks set to stretch into 2018, with data on Thursday showing most factories and consumers stepping up a gear, giving policymakers more reasons to discuss an end to crisis-era stimulus.
Industrial production marked its first back-to-back months of increases this year, with a 0.6 rise in November following a 0.5 percent gain in October, the government said. Factories are churning out memory chips for smart phones and semiconductor manufacturing equipment to fill orders from Asia and North America.
Japan's long-cautious consumers are also spending more on electronics, cars and fuel, numbers showed. Retail sales in November increased 2.2 percent from a year earlier, better than the 1.2 percent predicted by economists.
"Consumer spending is doing well, supported by rising stock markets," said Hiroshi Miyazaki, senior economist at Mitsubishi UFJ Morgan Stanley Securities. "The Bank of Japan's policy focus is on interest rates, so it is only natural to question its purchases of risk assets."
Manufacturers project output will jump 3.4 percent in December but then drop 4.5 percent in January, suggesting some moderation.
The numbers add to a string of data showing Japan's economy is in its best shape in more than a decade. The jobless rate is at a 24-year low, exports have risen every month this year, business investment is up for four straight quarters and GDP has expanded every quarter for nearly two years.
Japan's stock market, meanwhile, has rallied more than 20 percent this year to reach 26-year highs, which has also boosted consumer sentiment.
The surprisingly strong growth in recent months prompted some BOJ board members to raise the prospect of reducing the central bank's massive stimulus, a summary of opinions from last week's meeting showed on Thursday.
Such policies were aimed at jolting Japan out of deflation but some BOJ board members are encouraging debate about raising rates or lowering purchases of exchange-traded funds.
If the outlook for prices and the economy improves, the BOJ will need to consider whether "adjustments in the level of interest rates will be necessary," one board member said.
Another board member said the BOJ should examine the policy effects and the possible side effects of ETF purchases from "every angle" because of rising stock prices and earnings.
The BOJ buys long-term government debt to keep 10-year yields around zero and also buys ETFs, which are traded on the stock market, increasing its holdings by around 6 trillion yen ($53 billion) a year.
The summary of opinions does not identify individual speakers, and it is unclear whether a majority of the BOJ's nine-person board shares these views.
But it is clear that the economy's strength has spurred debate about when and how to end the central bank's aggressive monetary easing, which includes buying massive amounts of government bonds, stocks and other assets to keep interest rates low and flood the market with money to spur inflation.
Inflation, however, remains stubbornly low, with the core consumer price index up 0.9 percent in November, data this week showed, far from the BOJ's target of 2 percent.
BOJ Governor Haruhiko Kuroda said last week that as long as consumer prices remain distant from the BOJ's 2 percent inflation target he does not want to raise rates.
When the BOJ first launched its ETF purchases in 2013, it argued such buying of unconventional assets would lower risk premiums and help the economy overcome deflation.
But some traders argue that the BOJ's ETF purchases artificially push up the prices of underlying shares, and that strong stock market gains this year mean these purchases are no longer warranted.
"The economy is doing well, but that doesn't make the BOJ's job any easier," said Norio Miyagawa, senior economist at Mizuho Securities. "I personally think the BOJ should stop buying ETFs, but if they did now, stocks would fall, the yen would rise, and that would actually worsen the economic outlook."
($1 = 113.1700 yen) (Reporting by Stanley White; Editing by Malcolm Foster and Sam Holmes)