Japan’s industrial output increased the most in seven months in December as manufacturers made up for disruptions caused by Thailand’s worst floods in 70 years.

Factory production rose 4 percent from November, when production slid because of supply disruptions, the trade ministry said in Tokyo Tuesday. The median estimate of 30 economists surveyed by Bloomberg News was for a 3 percent gain.

Manufacturers from Honda Motor Co. to Toyota Motor Corp. are optimistic about demand as they recover from a year of natural disasters at home and in Thailand. A stronger currency and a slowing global economy weighed down by Europe’s fiscal woes are risks for growth in Japan.

“Production levels will rise again in January as companies’ facilities recover,” said Yoshimasa Maruyama, chief economist at Itochu Corp. in Tokyo. “After that, there’s still the strong yen, the European sovereign-debt crisis on the horizon, and the global slowdown, so from February onward production will slow again.”

The yen traded at 76.36 to the dollar as of 9:20 a.m. in Tokyo, from 76.37 before the report. In the past 12 months, the yen has gained 7.4 percent against the dollar and 11.9 percent against the euro.

In a sign the rebound in output hasn’t yet improved conditions in the nation’s job market, the unemployment rate unexpectedly rose to 4.6 percent last month from 4.5 percent in November, according to the statistics bureau in Tokyo. 

Honda and Toyota both scrapped profit forecasts in November after flooding in Thailand caused component shortages and factory closures.

Automakers said they expect demand to recover this year. Toyota Motor, the world’s largest seller of gasoline-electric autos, revised sales up last week by 100,000 vehicles from December, on demand for hybrids buoyed by government tax breaks on fuel-efficient cars. Honda Motor President Takanobu Ito last week forecast the highest business results for Japan’s third- largest carmaker in at least five years, led by North American sales. (Bloomberg)

“It will be the year of the complete rebound,” Ito said in an interview.

Output in the transport equipment industry increased 12.3 percent in December, the largest gain since June, according to the trade ministry.

Manufacturers plan to raise production 2.5 percent this month, and boost it 1.2 percent in February, a government survey of companies in Tuesday’s report showed.

The government compiled four extra budgets last year to fund reconstruction, money that economists anticipate will bolster demand in the world’s third-largest economy this year.

“Right now production is susceptible to overseas demand, however by spring, reconstruction demand will play a bigger part when demand for concrete and cement picks up,” said Shuichi Obata, senior economist at Nomura Securities Co. in Tokyo before the report.

Reports in the past month have shown that retail sales advanced in December and machinery orders rose in November. Exports slid for a third month in December.

“After March’s earthquake, inventory levels decreased worldwide, and Japanese carmakers are still trying to make up for the loss,” said Jun Kawakami, market economist at Mizuho Securities Co. Ltd in Tokyo before the report. He said that signs that the U.S. economy is picking up will compel carmakers to focus on increasing inventory in that market. 

(Bloomberg)