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Japan’s industrial production rose a seasonally adjusted 3.4 percent in January from the previous month to its highest level in 37 months, due partly to steady demand for digital home appliances, the government said Friday.

The index of output at mines and factories rose to 101.2, the highest level since the 102.7 registered in December 2000, against the base of 100 for 2000, the Ministry of Economy, Trade and Industry said in a preliminary report.

The January increase, which follows a 0.8 percent fall in December, surpassed a 2.7 percent rise on average projected by economists polled by Kyodo News.

The upbeat result prompted METI to drop a cautious phrase — “the trend of final demand is still unclear” — from its assessment of industrial output.

A METI official said the ministry removed the phrase as it is not appropriate when exports continue growing and a pickup is visible in capital investment.

But the ministry stopped short of revising the general tone upward, leaving unchanged for the fourth straight month the phrase, “There is a sign of recovery.”

“Our prediction shows industrial production will drop in February and an increase in March will not be very big,” the official said.

Some analysts are also wary about adopting the view that industrial production is on a full recovery path.

“The data in the reporting month are good, but companies still remain very cautious about their production planning and are closely monitoring movement of their shipments,” said Takehiro Sato, a senior economist at Morgan Stanley Japan Ltd.

On the other hand, Sato said, possible further appreciation of the yen against the dollar is not likely to hit manufacturers so badly, as the recent expansion of industrial production is led by the electronic parts and devices sector.

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