The report specifies that Japanese factory output plunged in July following the U.S. tariffs, data showed Friday, complicating the central bank’s decision on the timing of the next rate hike.

While Japan’s unemployment rate hit a multi-year low in July in the face of a tight labor market, retail sales rose much less than expected in a sign that rising living costs were weighing on consumption.

Signs of persistent inflationary pressure and downside risks to growth show the challenge facing the Bank of Japan in determining when to resume interest rate hikes.

Japan’s head of economics, Stefan Angrick, and frontier markets at Moody’s Analytics, noted that inflation is eroding wage gains and weakening consumer spending in this country.

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