Japanese industrial production rose for a third straight month in January, as the country's companies gained confidence in the global recovery, the government said Monday.

The Ministry of Economy, Trade and Industry said factory output rose 2.4 percent from December. Transport equipment, general machinery, plus iron and steel were the major contributors to the gains.

The figure was below an average market forecast for a 3.8 percent rise by Kyodo news agency and a forecast for a 5.7 percent increase in the government's industrial production survey last month. But the ministry still upgraded its assessment of the state of Japan's output, a key measure of overall economic activity.

It now says industrial production "continues to show an upward movement," slightly more upbeat than last month, when it said production "shows signs of an upward movement."

The numbers indicate that overseas demand for Japanese goods continues to accelerate, good news for Japan's economy, which is heavily dependent on external demand.

Last week, government data showed that consumer prices fell for the 23rd straight month, as deflation continues to weigh down the domestic recovery. Price falls can lead to job and wage declines, and put pressure on government officials to keep interest rates low.

Japan also received bad news earlier last week when Moody's Investors Service cut its outlook on the country's debt rating, questioning the government's power to enact reforms even as it struggles with the highest debt burden among advanced economies.

The industrial production survey for the next two months shows the indicator inching up 0.1 percent this month and rising 1.9 percent in March.

Compared to January a year ago, production was up 4.7 percent.
One cause for concern is that inventories continued to creep up in January, rising 4.7 percent from December, the second straight month of increase. Increased inventories can signal a possible downturn in future production.