TOKYO, Jan 31 (Reuters) - Japan's industrial output jumped 2.5 percent in December, rising at the fastest pace since June 2011, suggesting the world's third-largest economy may be recovering from a mild recession.

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KEY POINTS:

- Output jumped 2.5 percent in December, against a median estimate of a 4.5 percent gain in a Reuters poll of economists.

- Manufacturers expect output to rise 2.6 percent in January and increase 2.3 percent in February.

- The Markit/JMMA Japan Manufacturing Purchasing Managers Index (PMI) rose to a seasonally adjusted 47.7 in January from 45.0 in December. The pace of contraction slowed for the first time in four months.

COMMENTARY:

SHUJI TONOUCHI, SENIOR FIXED INCOME STRATEGIST, MITSUBISHI UFJ MORGAN STANLEY SECURITIES, TOKYO

'The results are not that bad and the forecasts show that production could continue to grow at a good pace. We can say that production is bottoming out.

'Overseas economies are not likely to deteriorate any further, so this will support Japanese production and the overall economy.

'Production in cars is recovering, and there are also signs that Japan's domestic demand is stabilising.'

TAKESHI MINAMI, CHIEF ECONOMIST, NORINCHUKIN RESEARCH INSTITUTE, TOKYO

'The increase comes in part as a reaction to the decline in the previous month and suggested that the economy may have bottomed out, but the outlook is far from certain.

'The biggest concern is the U.S. economy, which turned out surprisingly weak in the final quarter, and the Chinese economy is picking up only moderately. As such, I cannot tell whether the Japanese economy may return to an export-led recovery quickly.

'The Bank of Japan is likely to stand pat on policy at least until April when it reviews its price and economic projections under a new governor.'

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TABLE:

To view the full tables for industrial production, click on:

http://www.meti.go.jp/english/statistics/tyo/iip/index.html

BACKGROUND:

- The government led by Prime Minister Sinzo Abe compiled a 10.3 trillion yen ($114.5 billion) economic stimulus plan this month, the biggest spending boost since the global financial crisis, as part of his ambitious plans to revive the economy.

- It also approved on Tuesday a $1.02 trillion draft budget for the next fiscal year that aims to nudge tax revenues above new bond sales for the first time in four years, but still relies on borrowing to cover 46.3 percent of its spending.

- The Bank of Japan last week doubled its inflation target to 2 percent and pledged an open-ended commitment to buying assets next year to help beat nagging deflation.

- Analysts expect Japan will grow around 2 percent in the next fiscal year from April, aided by the new government's stimulus spending and the yen's retreat on expectations of further monetary policy easing.

(Reporting by Kaori Kaneko, Tetsushi Kajimoto and Stanley White; Editing by Edmund Klamann) Keywords: JAPAN ECONOMY/

(kaori.kaneko@thomsonreuters.com)(Reuters Messaging:)(kaori.kaneko.thomsonreuters.com@reuters.net)(+81-3-6 441-1983)

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