The country's jobless rate rose to 5.3 percent, up for the fourth consecutive month and hitting its highest level since November.

The actual number of jobless fell 1.1 percent from the previous year to 3.44 million, according to the Ministry of Internal Affairs and Communications. Those with jobs fell 0.3 percent to 62.8 million.

Meanwhile, industrial production retreated 1.5 percent in June from the previous month as factories reduced output of large passenger cars and cell phones. It was the first fall in fourth months and undershot Kyodo news agency's market forecast for a flat reading.

"Industrial production continues to show an upward movement althought it has been pausing temporarily in part," the Ministry of Trade, Economy and Industry said in its report.

Companies surveyed by the ministry expect factory output to fall 0.2 percent in July, then climb 2 percent in August.

Deflation persisted as Japan's core consumer price index, which excludes fresh food, fell 1 percent from a year earlier in the 16th consecutive month of decline.

The government's new high school tuition breaks weighed heavily on prices, dragging education costs down 13 percent.

Friday's data highlight ongoing weaknesses in the world's second largest economy even as Japanese companies report stellar quarterly earnings. Thanks to strong overseas demand, major Japanese companies including Sony Corp. and Panasonic Corp. rebounded back to profits in the April-June period.

But with governments around the world phasing out stimulus spending, growth is expected to slow in Japan and in major export markets. A strong yen also poses a risk to corporate earnings and may drag prices lower.

The core CPI for Tokyo _ considered a barometer of broader price trends _ fell 1.3 percent in July, pointing toward another nationwide drop this month.

Lower prices may boost individual purchasing power, but deflation is generally bad for an economy. It plagued Japan during its "Lost Decade" in the 1990s, hampering growth by depressing company profits, sparking wage cuts and causing consumers to postpone purchases. It also can increase debt burdens.

Japan's central bank says it does not tolerate deflation, but it expects prices to continue falling for the next couple of years. The new numbers may increase political pressure for the Bank of Japan to intensify the fight against deflation.

In a separate report, the ministry said average monthly household spending rose a real 0.5 percent in June.