Employment levels are rising

The unemployment rate fell to 4.1% in July, down from 4.2% the previous month, government data showed.

Analysts said the figures indicated a steady improvement in the labour market which should help to lift the economy.

However, other data showed that household spending fell in July as a result of cool and rainy weather.

Spending in July was down 1.3% in July from a year earlier - the seventh month in a row that there has been a year-on-year decline, and worse than analysts' predictions of a 0.8% drop.

"The household spending data was a bit of a surprise," said Takuji Aida, chief economist at Barclays Capital in Tokyo.

"(But) as long as wages are rising, personal consumption should be supported."

Interest rates

In July, the Bank of Japan raised its key interest rate from 0% to 0.25%, the first increase in nearly six years, as a result of strong growth and falling unemployment.

Analysts said that the latest jobs data - which showed that the number of people employed had risen for the 15th month in a row on a year-on-year basis - showed the labour market remained strong.

"I expect the unemployment rate will soon improve to below 4%," said Taro Saito, senior economist at NIL Research Institute.

However, despite the continued improvement in the labour market, analysts added that they saw little need for the Bank of Japan to raise rates further in the short term.