Japan's factory output jumps, inflation up but anxiety lingers

Japan's factory output rose in January at the fastest pace in more than two years and core inflation hovered at five-year highs, suggesting the economy has enough momentum to withstand an expected hit from a sales tax hike scheduled for April. Other data were equally upbeat, with labor demand improving and household spending rising in a sign the world's third-biggest economy is on course to shaking off two decades of stagnation even as it steers through some speed bumps. Domestic consumption is seen supporting activity as shoppers brought forward purchases, but the recent debate in markets has centered around an expected chill in demand after the tax hike and the risks that it may take the wind out of the government's growth strategy. "I'm not that confident about the economy after the sales tax hike," said Norio Miyagawa, senior economist at Mizuho Securities Research & Consulting Co.

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