Government data released on Wednesday showed that Japan's factory output unexpectedly declined in August compared with the previous month.

According to data published by Japan's Ministry of Economy, Trade and Industry, industrial output in August fell 1.7% month-on-month, while the median market forecast had been for a gain of 1.7%. This marked the second consecutive month of decline for the data.

Manufacturers surveyed by the Ministry of Economy, Trade and Industry expect seasonally adjusted industrial output to rise 3.2% in September and 3.1% in October.

In August, production activities were disrupted by earthquakes and typhoons. Automobile output fell 6.8% month-on-month, while output of general machinery and commercial machinery dropped 6%.

This indicator will be one of the key factors for the Bank of Japan to weigh when deciding whether to raise interest rates in the near term.