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Japan Factory Output Continues To Improve

Japan's industrial production rose for third straight month in June as world's No. 3 economy stages a recovery from the earthquake and tsunami.

TOKYO (AP) -- Japan's industrial production rose for the third straight month in June as the world's No. 3 economy stages a recovery from the March 11 earthquake and tsunami.

Factory output climbed 3.9 percent from the previous month and is expected to continue growing in the months ahead. Cars and electronic parts helped fuel the improvement, according to the Ministry of Economy, Trade and Industry.

Industrial production is a key indicator of Japan's economic health, and its steady climb suggests that manufacturers are restoring capacity after the tsunami wiped out towns along Japan's northeast coast and damaged critical parts factories.

The disruption led to a big plunge in output for Japanese manufacturers such as Toyota Motor Corp. and industrial production is still 5.3 percent lower than it was in February before the disasters.

Shipments jumped 8.5 percent, which lowered inventories by 2.8 percent. That implies "further upside for production in the months ahead," said Kyohei Morita, chief economist at Barclays Capital Japan, in a report.

Despite mandatory summer power cuts, companies surveyed by the ministry expect output to rise 2.2 percent in July and 2 percent in August.

The government has ordered large users in the Tokyo area to reduce power usage by 15 percent through Sept. 22 to offset the loss of the tsunami-crippled Fukushima Dai-ichi nuclear power plant.

"These numbers suggest that electric power problems are not affecting summer production anywhere near as much as initially feared," said Goldman Sachs Japan chief economist Naohiko Baba in a report.

He warned, however, of global headwinds that could dampen recovery in autumn. Uncertainties about the U.S. economy do not bode well for Japan, which relies on exports to drive growth.

Also complicating the outlook is a strong yen. Investors sold the dollar amid concerns about the U.S. debt limit deadlock, sending it to the mid 77-yen level. The yen hasn't been this strong since before the Group of Seven major industrialized economies intervened to weaken the Japanese currency in the aftermath of the March earthquake and tsunami.

The industrial production figures stand in contrast to more sobering data about jobs and households.

Japan's seasonally adjusted unemployment rate rose slightly to 4.6 percent from 4.5 percent in June, the Ministry of Internal Affairs and Communications said. But the result does not include data from three hardest-hit prefectures -- Fukushima, Miyagi and Iwate -- where the number of jobless people surged after the disaster.

Employment conditions "remain severe" and require vigilant monitoring to assess the impact of the disaster, said labor minister Ritsuo Hosokawa, according to Kyodo News agency.

Monthly household spending fell 4.2 percent from a year earlier, and monthly household income fell 6.7 percent in real terms to 687,212 yen ($8,800).

The government also said core consumer prices in June climbed 0.4 percent from a year earlier. Higher fuel prices pushed up the figure, which excludes fresh food.

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