Japan factory output logs modest rise in January

Japanese factories boosted output last month, ramping up output of cars, steel and electronics, figures showed Thursday, but the data fell short of expectations as the economy struggles to gain traction.

The official numbers come as the world's third-largest economy has served up mixed signals with output rising for two consecutive months but the trade picture cloudy on weak export demand.

Japan's economy shrank for a third straight quarter between October and December, leaving it mired in recession and highlighting the size of the job ahead for Prime Minister Shinzo Abe.

Abe, who came to power in December, has pledged to conquer the country's long-running deflation with big spending and aggressive monetary easing.

On Thursday he nominated Asian Development Bank chief Haruhiko Kuroda as the next governor of the Bank of Japan, a key post in Tokyo's bid to overhaul the limp economy.

The latest figures show Japan's factory output rose 1.0 percent from the previous month, weaker than a market estimate of a 1.5 percent expansion and lower than a revised 2.4 percent on-month increase in December.

The economy and trade ministry, however, hailed the data as a sign that things are turning around, saying in a statement that "industrial production has bottomed out and shows some signs of picking up".

Japan's manufacturers have been helped by a weakening in the yen over the past few months, after the unit hit a record around the 75-level against the dollar in late 2011 and remained strong through most of last year.

The dollar bought 92.57 yen in morning forex trade on Thursday.

A strong yen makes Japanese products less competitive overseas and shrinks the yen value of repatriated foreign income.

"Exports were still weak in January, so you can't really say whether Japan is clearly in recovery or not," Mizuho Research Institute economist Haruka Kazama told Dow Jones Newswires.

"But in terms of the outlook, if exports recover a bit more on the back of yen weakness, then production should show some more strength."

Japan's factory production slipped 0.3 percent in 2012 on-year, after a decline in 2011 when industry was hammered by the quake-tsunami disaster and Fukushima nuclear crisis.

Weakness in debt-hit Europe and a territorial spat with China, which sparked a consumer boycott of Japanese goods, has weighed on export demand.