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INCORPORATES BC-AS-FIN-ECO--Japan-US; ADDS banking minister comment; stocks rallying; minor edits thruout.

INCORPORATES BC-AS-FIN-ECO--Japan-US; ADDS banking minister comment; stocks rallying; minor edits thruout.

The economy minister said Friday Japan's recovery was on solid track, brushing off data showing prices and production slipped despite improvement in the job market.
In data released Friday, Japan's unemployment rate dropped to 3.6 percent in July from 3.7 percent in June, better than the 3.7 percent expected by economists surveyed by Dow Jones Newswires and Nikkei.
The numbers suggest tightening in the labor market continues as baby boomers retire and are replaced by younger generations. That may mean wage increases, which would be a big plus for growth.
The ministry also said the number of jobless fell for the 20th straight month, decreasing by 340,000 people from the same month a year earlier to 2.34 million.
The news wasn't as good for consumer prices, with data revealing the world's second largest economy is still struggling to escape deflation, in which prices continue to decline, depressing wages and growth.
Japan's nationwide core consumer price index fell 0.1 percent in July from a year earlier, the sixth straight month of decline, according to the Ministry of Internal Affairs and Communications.
That matched the average forecast of economists polled by Dow Jones Newswires and Nikkei. In June, the index slipped 0.1 percent as well.
Separately, the government said industrial production fell 0.4 percent in July from June, for the first decline since May. Industrial output rose 1.3 percent in June following a 0.3 percent fall in May.
Economy Minister Hiroko Ota said she wasn't "too worried," noting the drop in July output was partly due to a strong earthquake that temporarily shuttered a car parts maker and forced some automakers to stop production until the parts maker was back up.
Ota remained upbeat, noting that employment was "fairly solid."
"Overall, the economy is moving in a solid direction," she said.
The new bank minister as well echoed Ota's sentiments, saying that the subprime troubles have not so far posed any major problems for the Japanese economy.
"It's necessary to keep an eye on whether the problem gets more serious," Yoshimi Watanabe, the minister, told reporters.
Earlier in the day, Japan's new finance minister said he exchanged notes over the phone with U.S. Treasury Secretary Henry Paulson on the possible fallout from the U.S. credit crisis.
In what he called a 20-minute courtesy call following his appointment earlier this week, Finance Minister Fukushiro Nukaga said Paulson told him global economic fundamentals are on a sure footing but that financial markets may need some time to calm down.
"I told the secretary that the Japanese economy is on a solid growth path but that I will continue to closely monitor Japanese financial market moves," Nukaga told reporters.
Nukaga quoted Paulson as saying that he believes the global economy will successfully ride out the problems.
Global markets have been volatile in recent weeks since the emergence and spread of the U.S. subprime mortgage crisis.
Although the problems in the credit markets aren't believed to directly hurt U.S. and Japanese economies, worries remain about possible indirect damage, including the recent weakening of the dollar.
Still, the continued drop in the core price index, which excludes volatile fresh food prices, may not be good news for the Bank of Japan.
The central bank last raised its key rate in February to 0.5 percent, judging that price stability and consumer spending would withstand slightly tighter credit, and it has been trying to gradually raise interest rates further.
The Bank of Japan held off on a hike earlier this month because of global market concerns over the U.S. subprime mortgage crisis.
The core CPI for the Tokyo area _ also released Friday and a leading indicator for nationwide consumer prices _ was flat in August from a year earlier, better than economists' forecast for a 0.1 percent fall. It was the first flat reading since May.
Japanese stocks rallied Friday on news that the U.S. government is working on a policy to ease the subprime woes. A stronger dollar, near 116 yen, also helped lift share prices, and the benchmark Nikkei 225 stock index closed up 2.57 percent Friday.
Later in the day, U.S. President George W. Bush intends to discuss in a White House event ways to help the hundreds of thousands of American borrowers hard hit by the housing slump and the tightening credit that are rocking financial markets.


Updated : 2020-12-03 18:57 GMT+08:00