Japanese figures released today showed a jump in the nation's jobless rate and a decline in consumer prices.
The unemployment rate worsened to 3.8 per cent in August from 3.6 per cent a month earlier, the first rise since September 2006.
Japan's nationwide core consumer price index fell for the seventh straight month, falling 0.1 per cent in August from a year earlier. That suggests Japan has yet to escape from deflation.
But in some good news, the government said Japanese industrial production rebounded 3.4 per cent in August after declining in July due to plant shutdowns after an earthquake hit north-central Japan.
A lack of inflationary pressure will likely cast doubt on the Bank of Japan's decision to raise rates in the coming months, even as the central bank deals with lingering concerns over a US economic slowdown and the fallout from the subprime mortgage problems.
Economy Minister Hiroko Ota said today that Japan's trend toward economic recovery was continuing. "Although the consumer price index remained in negative territory, there is not much change in price conditions and an exit from deflation is in sight," he said.
The core CPI for the Tokyo metropolitan area - leading price indicator for rest of nation - fell 0.1 per cent in September from a year earlier. Economists had forecast a flat reading.