A look at economic developments around the globe

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TOKYO -- Japan's industrial output rose for the third straight month in May as manufacturers encouraged by signs of improving demand rushed to replenish inventories, the government said. Industrial production in the world's second-biggest economy increased 5.9 percent from the previous month, matching a rise in April that marked the biggest jump since March 1953. However, output continued to fall from a year earlier, though the rate of decline eased.

Japanese companies have suffered an unprecedented plunge in global demand that has dragged the country into its steepest recession since World War II. Massive government stimulus spending around the world, particularly in China, is helping fuel sales of cars, equipment and machinery.

Economists, however, had hoped for slightly better results and warn of waning momentum in the coming months.

Separately, Japan's auto production fell for the eighth straight month in May, plummeting 41.4 percent from a year earlier. The Japan Automobile Manufacturers Association also said exports from Japan declined for the eighth straight month, plunging 55.9 percent from a year earlier.

In markets, Japan's Nikkei 225 index slid 93.92 points, or 1 percent, to 9,783.47, while Hong Kong's Hang Seng index declined 0.4 percent, to 18,528.51. Meanwhile, Australia's benchmark sank 0.4 percent to 3,886.9, while South Korea's Kospi slipped 0.4 percent to 1,388.45. Markets in mainland China and India rose.

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HONG KONG -- The head of China's central bank said the country's economy was on the mend and expressed confidence that a government target of 8 percent growth this year would be met. Zhou Xiaochuan, governor of the People's Bank of China, said signs the downturn in the world's third-largest economy was leveling off began to emerge in March.

Zhou was in Hong Kong to sign off on a pilot program allowing the use of China's currency, the yuan, for trade between the territory and mainland China. It's among recent moves by China to internationalize its currency and shift away from the dominant dollar. China's fortunes are deeply intertwined with the greenback. Beijing is the world's largest holder of U.S. debt, which it purchases with its vast foreign currency reserves. Over the weekend Zhou said there will be no sudden changes in its policy on foreign exchange reserves.

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BASEL, Switzerland -- The Bank for International Settlements urged governments to move away from "staggering" stimulus packages as the global economy stabilizes and focus instead on reforming the international financial system.

BIS, a key standard-setter for the world economy as the central banks' central bank, said in its annual report that government intervention has helped prevent a worse recession. But now that the "sense of free fall has dissipated" and a return to growth may be reached later this year, governments need to come up with plans to put their economies on a more sustainable footing, based less on debt in the rich world and exports in developing nations.

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SHANGHAI -- China risks frittering away its stimulus spending on speculation in stocks and real estate, reports said, citing economists who say surging bank loans risk inflating risky asset bubbles. While recent gains in shares and property prices are a welcome respite for investors, putting funds meant for stimulus projects into speculative investments could undermine the government's effort to boost growth and reduce the economy's heavy reliance on exports. About 20 percent of bank lending is going into stock speculation, and another 30 percent or so is going into the property market, state-run newspapers cited Wei Jianing, an economist with a Cabinet-level think tank, as saying. Wei and other economists said at a conference that the huge flow of money into shares and property could be fueling risky, unsustainable price increases, China Business News and other reports said.

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PARIS -- World oil demand is likely to grow by an average of 0.6 percent annually over the 2008-2014 period, the International Energy Agency forecast, lowering its forecast amid the global recession. The IEA, which advises oil-consuming countries, said oil demand would reach 89 million barrels a day by 2014 under the International Monetary Fund's current forecast of a return to 5 percent annual economic growth by 2012. In 2009, however, oil demand is set to drop for a second straight year for the first time since 1982-1983.

Growth in oil demand is expected to come mainly from developing countries in Asia and the Middle East, the IEA said. If the trend continues, demand outside the 30-member Organization for Economic Cooperation and Development will outstrip that within the OECD by 2014, the IEA said.

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LONDON -- Top bankers and business executives gathered in London were upbeat about a developing recovery in the global economy, but cautioned against any slowdown in reforming regulatory and financial systems to prevent a repeat of the crisis.

Deutsche Bank head of global markets Anshu Jain said at the London Business School conference that he expects the banking system to end the year in a far better position, while General Electric Co. chief executive Jeffrey Immelt said the period of crisis management is "behind us."

In markets, Germany's DAX index closed up 108.62 points, or 2.3 percent, at 4,885.09, while France's CAC-40 rose 63.95 points, or 2 percent, to 3,193.68. The FTSE 100 index of leading British shares was up 53.02 points, or 1.3 percent, at 4,294.03.

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BRUSSELS -- European business and consumer confidence climbed for the third month in a row in June but still languished near its lowest point in two decades, the European Commission said. It said the main players in the economy "seem to be gaining confidence that the crisis is easing" as industrial and services companies expect to be employing more people in future and consumers are worrying less about losing their jobs.

EU officials warn against these apparent green shoots signaling an end to the recession, saying the pickup in confidence doesn't go beyond expectations and companies have not yet reported an increase in output.

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MOSCOW -- Prime Minister Vladimir Putin urged Russia's state-controlled banks to boost lending to major industries by at least 150 billion rubles ($4.8 billion) in July, and by similar amounts in August and September. He advised the banks' heads not to take their summer vacations until this was done.

Russia's economy has been hit hard by the global financial crisis, with borrowing reduced sharply. Stock markets and the national currency have regained some of their initial losses, but businesses still complain that credit is hard to come by.

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