Japan’s factory output fell more than expected in August, with a 1.2% decline, while retail sales dropped for the first time in over three years. U.S. tariffs could still impact Japan’s production, keeping the Bank of Japan cautious about raising rates. Manufacturers predict a 4.1% growth in output for September.

Despite a recent trade deal with Washington, Japanese exporters are still concerned about the impact of U.S. tariffs. Motor vehicle production increased by 2.5% in August, but analysts remain cautious about the overall economic outlook. The production of electrical machinery and fabricated metal saw significant declines.

BOJ Governor Kazuo Ueda stated that interest rates will continue to rise if the economy meets forecasts. Retail sales in Japan fell by 1.1% in August, the first decline in 42 months, driven by lower automobile sales. The Bank of Japan is expected to maintain a cautious stance amidst ongoing economic uncertainties.

Read more at Yahoo Finance: Japan’s economy shows strain as factory output and retail sales drop