• The Associated Press


The nationwide jobless rate jumped to its highest in more than four years in March while household spending continued to slide, underscoring the ongoing pain being inflicted on the world’s second-biggest economy. Prices also fell, fueling deflation worries.

A day after the government released a bullish report on industrial production, it said Friday that unemployment rose to 4.8 percent, up from 4.4 percent in February and the worst reading since August 2004.

The actual number of unemployed jumped 25 percent from a year earlier to 3.35 million, while the number of employed workers fell 1.4 percent.

Meanwhile, the key consumer price index, excluding volatile fresh food, fell 0.1 percent, the first decline since September 2007.

Labor conditions may even be more severe than the numbers reflect, since the unemployment rate does not include those who have simply given up looking for jobs, said Chiwoong Lee, an economist at Goldman Sachs in Tokyo.

“Since unemployment is a lagging indicator — it lags manufacturing capacity utilization by three months, for example — further worsening is in store as the current real economy is reflected,” Lee said in a note to clients.

Anxiety over jobs led families to spend less, with average monthly household spending declining 0.4 percent from the previous year, according the Internal Affairs and Communications Ministry.

Friday’s data stood in contrast to the hopeful news Thursday about factory output.

After tumbling sharply in recent months, industrial production rose 1.6 percent in March from February, the Ministry of Economy, Trade and Industry said. It marked the first climb in six months.

The outlook offered further reason for optimism. Factory output — vital in Japan’s export-dependent economy — is projected to rise 4.3 percent this month and another 6.1 percent in May.

“Japanese industrial production is turning the corner at a high speed,” said Masayuki Kichikawa, chief economist at Bank of America Securities-Merrill Lynch in Tokyo. “These figures should serve as strong evidence that the economy is on a recovery track.”

The central bank followed with its own relatively upbeat appraisal Thursday afternoon after the Policy Board left the key interest rate unchanged at 0.1 percent. While it projects gross domestic product will contract 3.1 percent this fiscal year through next March, it sees a turnaround emerging in the second half.

Faced with an unprecedented collapse in global demand, the economy has been mired in its deepest recession since the end of World War II.

Major exporters, including Toyota Motor Corp. and Sony Corp., moved quickly to adjust by reducing shifts, suspending factory lines and announcing thousands of job cuts over the past few months.

Their strategy looks to be paying off, with manufacturers now seeking to replenish thinning stockpiles in anticipation of higher demand from China and other parts of Asia.

But while brighter days may be ahead for manufacturers, other sectors of the economy will remain weak, said Kyohei Morita, chief economist at Barclays Capital in Tokyo.

Nonmanufacturers and households could get a reprieve from planned government aid, he said, but they will still be on the losing end of the economy.

“I don’t think there will be a real recovery for households before the first quarter of 2010,” Morita said.

“We really have to wait for manufacturers to stop cutting costs.”

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