Japan's unemployment rate rose unexpectedly in May, factory output declined and household consumption fell, illustrating the fragile nature of a recovery beset by weak domestic demand.
The data poses a challenge for Prime Minister Naoto Kan's government, with Kan placing efforts to cut the industrialised world's biggest public debt at the core of his agenda, eyeing eventual tax hikes.
Exports have driven Japan's recovery from recession but recent data showed the pace of shipments was losing steam amid anxieties over both the impact of global stimulus withdrawal and European debt on exports.
Japan's domestic picture remains weak, with unemployment surprising economists by edging higher in May to 5.2% from 5.1% in April, missing expectations of a fall to 5%.
Average household consumption also fell unexpectedly in May by 0.7%, the government said, defying expectations of a 0.5% rise as weak domestic demand continues to burden the Japanese economy.
Crippling deflation and weak domestic demand continue to weigh on growth as consumers defer purchases in the hope of further price falls. The government has said it aims to end deflation by fiscal 2011.
Analysts say that today's figures show Japan's export-dependent recovery has yet to reach the broader economy to establish a self-sustained recovery.
