Japan boosts output but unemployment up

TOKYO: A sharp rise in Japan's industrial output is boosting hopes of a recovery in the world's second-biggest economy even as government figures Friday showed unemployment had reached a five-year high.

While companies are starting to bet on an economic upswing, Japan's worst post-war recession is still impacting the world's number two economy through job losses and falling prices, the data show.

Factory output in April rose 5.2 percent on the previous month, the fastest monthly jump in more than half a century and far above market expectations for an increase of around 3.3 percent, the trade ministry said.

The second monthly increase in a row fuelled hopes that companies have run down most of their stockpiles and will keep ramping up production.

Manufacturers forecast that output may rise 8.8 percent in May and 2.7 percent in June, raising hopes for a rebound in Asia's biggest economy.

"This part of the data is very positive," said Shinko Research Institute economist Norio Miyagawa, saying the data suggests "output will likely remain firm this year."

Naoki Murakami, Monex Securities chief economist, said in a report that "it is possible that the production index will bounce back to late-2008 levels by the summer in a nearly V-shaped recovery."

However, new figures also showed that the effects of the global downturn are still impacting Japan by driving up unemployment, depressing household spending and bringing a return to deflation.

Japan's seasonally adjusted unemployment rate rose to 5.0 percent in April from 4.8 percent in March -- the highest since November 2003, said the Ministry of Internal Affairs and Communications.

"I'm quite disappointed that the job situation has deteriorated sharply," said Finance and Economy Minister Kaoru Yosano. "But we have to accept it as reality and we need to monitor price and job conditions very carefully."

Separate data showed there were only 46 job offers for every 100 job seekers -- matching the worst ever figure in June 1999.

Average monthly household spending dropped by 1.3 percent in real terms in April from a year earlier, falling for the 14th consecutive month.

The trend threatens a quick recovery, analysts say, because private consumption makes up nearly 60 percent of Japan's economy, and because falling demand drives down prices and triggers deflation.

Japan's core consumer prices fell 0.1 percent in April from a year earlier after a 0.1 percent drop in March, which was the first fall in 18 months.

Japan was stuck in a deflationary spiral for years after its economic bubble burst in the early 1990s, eroding corporate earnings and encouraging consumers to delay their spending in the hope that prices would fall further.