More Japan Workers Lose Jobs, Factory Output Falls

Japan received a sobering reminder Friday of its fragile recovery: The jobless rate rose, deflation deepened, and factories made fewer cars and mobile phones.

In this July 28, 2010 photo, office workers crossing a street during a lunchbreak are reflected on...

In this July 28, 2010 photo, office workers crossing a street during a lunchbreak are reflected on an electronic stock indicator in Tokyo. Japan received a sobering reminder Friday, July 30, 2010, of its fragile recovery: The jobless rate rose, deflation deepened, and factories made fewer cars and mobile phones. (AP Photo/Shizuo Kambayashi)

(AP)

The figures underscore ongoing weakness in the world's No. 2 economy even as Japanese corporations report stellar quarterly earnings. Thanks to strong overseas demand and deep cost cuts, major Japanese companies including Sony Corp. and Panasonic Corp. rebounded back to profits in the April-June quarter.

But with governments around the world phasing out stimulus spending, growth is expected to slow in Japan and in its major export markets. A strong yen also poses a risk for the country, as it reduces the value of profits brought back from overseas by exporters and makes their products less competitive on price.

"Momentum has faded more than producers and economists anticipated," said Goldman Sachs analyst Chiwoong Lee of the drop in factory production.

The damp economic news, along with worries about a stronger yen, cooled sentiment in the stock market. The Nikkei 225 stock average led Asian declines with a 1.6 percent fall to 9,537.30.

The jobless rate rose to 5.3 percent, up for the fourth consecutive month and hitting its highest level since November, the government said. The actual number of jobless fell 1.1 percent from the previous year to 3.44 million, according to the Ministry of Internal Affairs and Communications. Those with jobs declined 0.3 percent to 62.8 million.

Meanwhile, industrial production retreated 1.5 percent in June from the previous month as factories reduced output of large passenger cars and cell phones. It was the first fall in fourth months.

Companies surveyed by the government expect factory production to fall 0.2 percent in July, then climb 2 percent in August.

Deflation persisted as Japan's core consumer price index, which excludes fresh food, fell 1 percent from a year earlier for the 16th consecutive month of decline.