Japanese Prime Minister Naoto Kan (R) looks at Finance Minister Yoshihiko Noda (L) prior to take their seats in the parliament session to select a new prime minister, at the lower house of the parliament in Tokyo, on August 30, 2011. Yoshihiko Noda became Japan's sixth new prime minister in five years on Tuesday, starting a term in which he must push quake recovery, contain a nuclear crisis and revive the economy. - AFP Photo

TOKYO: Japan’s unemployment rate rose for the second straight month in July and household spending fell, illustrating challenges for new premier Yoshihiko Noda in safeguarding Japan’s recovery, analysts said.

The jobless rate stood at a worse-than-expected 4.7 per cent in July, up 0.1 percentage point from the previous month, excluding figures from the disaster-hit northeast of the country, the government said Tuesday.

The market had expected the rate to be flat at 4.6 per cent.

In separate data, average spending by Japanese households fell 2.1 per cent in July from a year earlier to 280,046 yen ($3,642), the government said Tuesday, with sentiment still lagging in the wake of the twin March disasters.

It fell 8.5 per cent in March following the record earthquake and a tsunami that devastated areas along the northeast coast.

Yoshihiko Noda is set to be confirmed Tuesday as Japan’s sixth new prime minister in five years, starting a term in which he must push quake recovery, contain a nuclear crisis and revive the economy despite a soaring yen.

His unpopular predecessor Naoto Kan and his entire cabinet resigned in the morning, making way for Noda, the former finance minister, to be confirmed by parliament as the new premier later in the day.

Analysts said Noda must move to secure Japan’s post-disaster rebuilding and shield the economy from a strong yen, which erodes exporters’ earnings and could accelerate a shift of production overseas.

“The number one task the new administration is facing is to compile and enforce a large-scale third extra budget to cover full-fledged relief and rebuilding from the disasters, which should have been implemented earlier,” said Tatsushi Shikano, senior economist at Mitsubishi UFJ Morgan Stanley Securities.

“Tackling the yen’s strength is also a pressing task. Production has been recovering after the slump in economic activities and economic data have indicated a pickup, but a higher yen is posing concern.”

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