TOKYO - Japanese factories slowed in November, spelling out the daunting task that lies ahead for a new conservative government in reviving the world's third-largest economy.
The 1.7 per cent drop in output from a month earlier - worse than a 0.5 per cent decline expected by the market - came as the Liberal Democratic Party took power this week on a campaign that pledged to inject new life into the limp economy, after it won a landslide election earlier this month.
Japanese firms have been hurt by a strong yen, turmoil in the key European market and the global economic slowdown, confounding the nation's recovery from the 2011 quake-tsunami disaster and nuclear crisis.
A territorial dispute with Beijing has also weighed on exports due to a consumer boycott of Japanese goods in China stemming from the spat.
The latest figures reversed a 1.6 per cent uptick in October factory production, with the economy ministry repeating its warning that output was "on a downward trend".
A survey of manufacturers, however, offered a measure of positive news with producers expecting output to rise 6.7 per cent in December and 2.4 per cent in January.
Masamichi Adachi, senior economist at JPMorgan Securities Japan, was cautiously optimistic, saying production would "probably" turn positive in the first quarter of 2013.
And that "will probably lead to positive growth in gross domestic product as well", Adachi told Dow Jones Newswires.
Separate data Friday showed consumer prices slipped 0.1 per cent on-year.
Japan has yet to reverse the deflation that has haunted its economy for years.
The nation's new leader, Shinzo Abe, has threatened to revise a law guaranteeing the Bank of Japan's (BoJ) independence if it refuses to adopt a two per cent inflation target - part of his get-tough fix for the economy.