Japanese Industrial Production Up 1.8 Percent

TOKYO (AP) -- Japan's factory output rose for the sixth straight month in August as stimulus measures around the world spurred global demand for the nation's exports.

Industrial production in the world's second largest economy increased 1.8 percent from July and "continues to show an upward movement," the government said Wednesday in a closely watched report.

It represents the first time production has expanded uninterrupted for half a year since October 1996-March 1997

The result slightly undershot a 1.9 percent rise forecast in a Kyodo news agency survey of economists and follows a 2.1 percent uptick in July. Strong gains among companies making steel and iron products, transport equipment and electronic parts fueled the gains.

The Ministry of Economy, Trade and Industry predicts output will expand 1.1 percent in September and 2.2 percent in October.

Shipments rose 1 percent, while inventories stayed flat after retreating for seven months as manufacturers slashed stockpiles.

"This aggressive cutting has made Japanese manufacturers leaner and should support production going forward," said Kyohei Morita, chief Japan economist at Barclays Capital in Tokyo. "Now it is a matter of restoring demand."

An unprecedented collapse in global demand sent production plunging by record levels earlier this year. Aggressive spending by governments since then, particularly China, has helped boost demand for Japan's exports.

The country emerged from a yearlong recession -- its worst since World War II -- in the April-June quarter.

Still, output in August was 18.7 percent lower than a year earlier, and companies remain reluctant to make capital investments or hire more workers.

Japan's unemployment rate hit a record 5.7 percent in July and is expected to have worsened in August. Consumer prices tumbled at a record pace in August, intensifying concerns that deflation could undermine the country's fragile economic recovery.

In its assessment last month, the central bank said that while Japan is on the rebound, global economic and financial developments pose significant risks in the future.

Steering the country away from its heavy reliance on exports is a top priority for Japan's new government, installed two weeks ago. Instead, Prime Minister Yukio Hatoyama's Democratic Party hopes to boost domestic demand and has promised cash handouts to families with children, toll-free highways and income supplements for farmers.

Labor market statistics will be released Friday in a week of several key economic indicators. The Bank of Japan's quarterly "tankan" survey of business sentiment is scheduled for Thursday.

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