Japan's industrial output up for third month in January

Image caption, Demand for large passenger cars contributed to increase in factory output

Japan's industrial production has risen for the third successive month in January, underlining optimism that the economy is recovering.

Factory output was up 2.4% from the previous month in January, compared with a 3.3% gain in December, the Trade Ministry said.

It was driven by demand for transport equipment, machinery and metals.

Japan was overtaken as the world's second-largest economy recently and has been trying to boost growth.

Analysts said that January's output figure was slightly weaker than many of them had expected.

However, they said the figures still pointed to improving conditions for growth and output.

"Data overall confirmed a steady improvement in production given that output is expected to increase in February and March," said Yasuo Yamamoto of Mizhuo Research.

This view was backed up by a Trade Ministry survey which showed that manufacturers now expect factory output to increase by 0.1% in February and 1.9% in March.

Uncertain future

Despite the positive outlook, analysts warn that Japan's recovery is still fragile and could be derailed by external, as well as internal, factors.

The most recent issue facing the global economy is the unrest in the Middle East and the subsequent spike in oil prices. Food prices have also been climbing in previous months.

"Rises in commodity prices are a big risk factor," says Tatsushi Shikano of Mitsubishi UFJ Morgan Stanley Securities.

Mr Shikano added that should commodity prices continue to rise then that may boost the cost of raw materials, hurting both manufacturers and consumers.

Japan's economic recovery has been largely driven by the export sector and an improving global economic environment.

However, analysts said that oil prices may crimp economic growth both globally and in Japan.

"If oil prices go up $20 more than they were before the recent unrest in the Middle East and Africa, it could push down Japan's gross domestic product for next fiscal year by 0.3 percentage point," Mr Shikano added.

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