In May Japans industrial production rose 5.9% month-to-month, according to preliminary data from the Ministry of Economy, Trade and Industry, matching the revised 5.9% climb in April. The rise in output was led by the automobile, electronics, and iron and steel sectors, but almost all other sectors saw increases too. These numbers show that Japans production grew at the fastest pace in 56 years, boosting hopes that the world's number two economy has returned to positive growth.

Japanese industrial output plunged last year in the midst of a brutal global economic downlturn, pushing Asia's biggest economy into its worst recession since World War II, but analysts say the worst appears to be over. Production numbers grew so fast that Japan could announce their sharpest rise since 1953.

The data suggest Japan's economy will post "solid positive growth" in April-June after the worst performance in decades in the previous quarter, said Takuji Aida, from investment bank UBS. "Production is rising as demand from China is holding up.

Japan sank into recession in the second quarter of 2008 as consumers around the world stopped buying the cars, high-tech goods and other exports that drove the country's recovery from its 1990s recession. "Government stimulus measures in Japan -- with purchase incentives for environmentally friendly cars, for example -- and stimulus packages overseas in countries like China and Germany are helping to support production," said Kyohei Morita, chief Japan economist at Barclays Capital.

In May, Japan enacted a record 13.93 trillion yen ($146.3 billion) extra budget to fund fresh stimulus measures, including subsidies for eco-friendly autos and electronics, as well as unemployment aid to curb the fall in household spending, as the country's jobless rate continued to climb.

The effect of the government subsidies for autos and electronics was also evident in retail sales figures, which were released separately by the METI. The figures still show a decline but this is getting smaller gradually, causing the government to see clear signs of moderation in it.

Factory output is expected to rise by 1.6 percent in July and 3.3 percent in August, according to the manufacturers' own forecasts, the ministry said. The production plans point to "a steady recovery... against a background of growth in export demand as the global economy recovers," said Naoki Murakami, chief economist at Monex Securities.

Worldwide pump-priming efforts, particularly in the United States, China and Japan, appear to be showing some positive effects, but there are concerns about the outlook once the impact of the stimulus spending measures fade. Consumer spending remains clouded but Japan is to release April-June gross domestic product data on August 17. (Yahoo News)