Japan's industrial output recovered only modestly in August from a recent string of natural disasters. Trade ministry data out on Friday showed factory output rose 0.7% in August from the previous month, less than market median estimate of a 1.5% rise and following 0.2% decline in the previous month.

Manufacturers surveyed by the trade ministry expect output to rise 2.7% in September and 1.7% in October.

The unemployment rate fell to 2.4% in August from 2.5% in the previous month, while the jobs-to-applicants ratio held steady at 1.63 jobs per applicant from, the highest level since January 1974, separate data showed.

Japan's work force has been shrinking rapidly due to its ageing population, which is causing the jobless rate to fall.

Despite the solid economy and tight labour market, inflation is struggling to accelerate.

Tokyo's core CPI, which includes oil products but excludes fresh food prices, rose 1.0% in the year to September, versus a 0.9% rise expected by economists and less than half the central bank's 2% target.

The Tokyo index is available a month before nationwide core CPI, and serves as a leading indicator of consumer inflation.

Japanese retail sales rose 2.7% in August from a year earlier, compared with a median market forecast for a 2.1% increase, separate data showed on Friday.

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