TOKYO (AP) — Japan's industrial production picked up pace in December from the month before, in a sign the world's third-largest economy may be stabilizing thanks to stronger global demand and government spending.

Increased output of large passenger cars and vehicle components and machinery for making semiconductors were the main factors helping to drive the improvement in manufacturing, the Ministry of Economy, Trade and Industry said Thursday. It said industrial output rose a seasonally adjusted 2.5 percent from November.

The government of Prime Minister Shinzo Abe is already claiming progress in breaking the deflationary slump that has weighed on Japan's growth for years. Share prices are approaching three-year highs and many companies have reported improved profits thanks to a weakening of the Japanese yen against other major currencies.

Still the indicators are mixed. Japan's unemployment ticked up 0.1 percent from the month before to 4.2 percent in December, the government said Friday.

The ratio of jobs available rose to 82 jobs per 100 applicants from 80 in November, the Ministry of Internal Affairs and Communications said.

Meanwhile, average household spending, which accounts for about 60 percent of Japan's economic activity, fell 0.7 percent in December from a year earlier, in price-adjusted terms.

Since Abe took office on Dec. 26, his administration has pushed ahead with a 20 trillion yen ($220 billion) stimulus package, a hefty proposed budget for the coming fiscal year and a commitment by the central bank to unlimited monetary easing to help spur growth.

All that spending is meant to break the cycle of falling prices that is thought to be hindering business investment and hobbling growth.

"Generating enough demand to create a sustained recovery has been an uphill battle for policymakers," Moody's said in a commentary Thursday citing barriers to growth such as Japan's shrinking workforce and high savings rate. "Together, these moves could kick-start a recovery, assuming that stronger growth in Asia helps revive Japan's exports as well," it said.

Challenged by opposition lawmakers to explain how Japan can afford to boost spending when its national debt is already twice the size of the economy, Abe insisted his plan would balance the national budget by 2020. He also defended his administration's reliance on public works projects.

"I intend to have a deep discussion of the plans and seek public understanding to ensure transparency," Abe said during the televised legislative exchange.

Higher tax revenues are expected to help offset some of the increased spending: Earlier this week the government raised its forecast for economic growth in the fiscal year that starts April 1 to 2.5 percent from 1.7 percent. Continued...