Japan output jumps but consumers unconvinced by Bank of Japan stimulus

Japanese households cut spending more than expected and retail sales fell for the first time in seven months in January, data showed on Friday, a sign the central bank's radical stimulus has yet to convince consumers that inflation will take hold.

In contrast to the gloom felt among households, companies look to be in better shape as they begin to benefit from the competitive advantage their goods get from a weak yen.

Factory output jumped at the fastest pace in nearly four years in January as companies ramped up spending at home and won more orders in emerging markets, suggesting that exports will keep the economy on track for a moderate recovery.

But the soft consumption underscores the uneven nature of the recovery and poses a headache for the Bank of Japan, which hopes its aggressive money printing will drive up inflation expectations and prompt households to spend more.

"If consumer spending doesn't pick up by April, it will be difficult for industrial production to accelerate," said Shuji Tonouchi, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities.

Separate data also underscored the dilemma the BOJ faces with inflation grinding to a halt on slumping oil prices, moving further away from its ambitious 2 percent target.