TOKYO Japan's jobless rate rose to 5.4 percent in may and nationwide consumer prices fell for the 33rd consecutive month, underlining the fragility of a recovery in the world's second largest economy.

The May unemployment rate was up from 5.2 percent in April, edging closer to a record 5.5 percent seen in December last year, the Ministry of Public Management, Home Affairs, Posts and Telecommunications said Friday.

"The employment situation remains severe," state Minister for Economic and Fiscal Policy Heizo Takenaka told a news conference.

The unemployment rate for men was at 5.5 percent, up from 5.4 percent, and that for women grew to a record 5.3 percent, up from 4.9 percent, AFP quoted the ministry as saying.

The number of people out of work rose to 3.75 million in May, up 270,000 from a year earlier, increasing for the 14th consecutive month, it said.

Economists argued Japan's jobless rate was likely to remain at the current level as companies continued to downsize in efforts to improve their efficiency.

"The employment environment remains tough as companies have been adjusting their human resources and cutting personnel costs," said Hideki Matsumura, economist at Japan Research Institute.

"Even in the long run, I think it is difficult to expect the unemployment rate to fall sharply." Credit Suisse First Boston economist Satoru Ogasawara agreed.

"Corporate restructuring continues to affect many companies and the unemployment rate could rise higher amid a deflation-plagued economy," Ogasawara said.

There was no let up in the deflationary cycle either as Japanese consumer prices fell 0.9 percent in May from a year earlier, marking the 33rd consecutive year-on-year decline, the ministry said.

Consumer prices in Tokyo, a leading indicator of prices nationwide, fell 0.8 percent year-on-year in June, following a fall of 1.2 percent in May. The June Tokyo price declined for the 34th straight month.

Meanwhile, Japanese industrial output in May grew 3.9 percent after rising 0.2 percent in April, boosted by a rise in output of electronic, machinery and transportation products.

"As the Japanese economy heavily depends on exports, these products that helped push the May output were mainly exports," said an official for the Ministry of Economy, Trade and Industry.

The May electronic output including personal computers and semiconductors rose 7.8 percent month-on-month and the transportation output that includes passenger cars increased 5.1 percent, the ministry said.

But the government forecast June industrial output would be flat month-on-month and July output was seen down 0.3 percent.

"Our forecast was due to increasing uncertainty over the U.S. economy as well as a prolonged depression in the Japanese domestic consumption," the ministry official said.

Ogasawara warned that economic recovery in Japan could be derailed if the United States slipped back into a deep economic slump.

"Since Japan's domestic demand remains feeble, we may not be able to write a scenario for an economic recovery if the U.S. economy slowed down," the economist said.