TOKYO: Japanese factories churned out a better-than-expected performance in April, but the upbeat data was tempered as the export powerhouse remained mired in deflation.

Economists were combing through a string of data — including factory output and inflation — for signs an economy-boosting plan by Prime Minister Shinzo Abe and his hand-picked team at the Bank of Japan was taking hold.

The policy prescription of big government spending and aggressive central bank easing to stoke the world’s third-largest economy, dubbed “Abenomics,” has helped push the yen into a steep decline which benefits Japan’s exporters.

Investors cheered as the benchmark Nikkei 225 stock index soared nearly 60 percent since late last year before jaw-dropping volatility in the past week sent the headline Nikkei plunging more than five percent on Thursday.

It bounced back yetserday, rising 1.37 percent, as markets reacted to a weakening yen and economy ministry figures which showed an April factory output rise of 1.7 percent over a month earlier.

Japan’s April jobless rate was flat at a multi-year low of 4.1 percent.

“There has been a clear recovery in demand for labor in manufacturing likely on the back of stabilization in exports and thus industrial production,” said Credit Agricole economist Yoshiro Sato.

Huge infrastructure projects following Japan’s quake-tsunami disaster two years ago were helping prop up demand for workers, Sato added.

The International Monetary Fund has kept its 1.6 percent growth forecast for Japan’s economy this year, giving Abe’s plan a thumbs up. The economy expanded again in the first quarter, confirming its exit from recession.

But the IMF also warned of “considerable downside risks” if Japan doesn’t chop its massive national debt — the worst among industrialized nations at more than twice the size of the economy.

A manufacturer survey showed Japanese producers remain cautious, expecting May factory output to be flat before slipping 1.4 percent in June.