Japan's manufacturers plan to limit production increases this month and in July, signalling that the economy may be slow to recover from its worst post-war slump.

Gains in output will slow to 3.1 per cent in June from May and 0.9 per cent next month, a Trade Ministry survey released yesterday showed.

Production climbed 5.9 per cent in April and May, the fastest pace in 56 years, the report said.

Industrial production is showing signs of "upward movement", said the ministry. Strong gains among companies making transport equipment, electronic parts and steel products contributed to the improvement in output.

However, the Nikkei 225 Stock Average fell 1 per cent yesterday, due to concerns that demand for Japanese cars and electronics would be too weak to sustain a recovery amid swelling unemployment at home and abroad. Even after boosting output to rebuild depleted inventories, Japanese manufacturers are making 30 per cent fewer goods than they were one year ago.

"The slowdown in the outlook numbers definitely casts doubt on just how sustainable this recovery is," said Mr Tetsuro Sugiura, chief economist at Mizuho Securities Research Institute.

"Companies have been rebuilding stock based on the idea that demand would recover, but however you look at it, it's hard to see that happening." BLOOMBERG

From TODAY, Business – Tuesday, 30-Jun-2009

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