TOKYO (AFP) - Japan's unemployment rate rose to the highest level in more than five years as companies shed jobs to cope with the country's worst recession on record, government data has shown.

The jobless rate climbed to 5.2 percent in May -- a level last seen in September 2003 -- up from 5.0 in April, the internal affairs ministry said.

The reading, which was slightly worse than an average market forecast of 5.1 percent, is close to a post-World War II high of 5.5 percent, which was last seen in April 2003.

The number of people in unemployment rose by 770,000, or 28.5 percent, from a year earlier to 3.47 million.

Many Japanese companies, particularly exporters, have moved swiftly to slash jobs and production in response to a slump in demand caused by the global economic downturn.

There were only 44 job offers for every 100 job seekers in May, a record low and down from 46 in April, a separate report from the labour ministry showed.

But some analysts expressed optimism that the labour market situation may start to stabilise before long.

"The jobless rate worsened slightly but is almost peaking out," said Hideyuki Araki, an economist at the Resona Research Institute.

"We are not in a vicious spiral of higher unemployment prompting consumers to tighten their purse strings, further damaging corporate earnings," he said.

Japan entered recession in the second quarter of 2008 as its heavy reliance on overseas markets as an engine of economic growth left it vulnerable to the fallout from the global economic crisis.

The Japanese economy suffered its worst contraction on record in the first quarter of 2009, shrinking at an annualised pace of 14.2 percent.

Experts say a full-fledged recovery is unlikely in Japan until demand picks up in major overseas markets such as the United States and Europe.

Japanese household spending edged up 0.3 percent in May from a year earlier, marking the first increase in 16 months, government data showed Tuesday.

The government said it was too early to say whether the latest data indicated that Japanese consumption was finally picking up.

"We still can't judge with data for a single month. It may have benefited from (fine) weather," one ministry official said.

Analysts said a sharp improvement in domestic demand appeared unlikely given the weak jobs market and shrinking population.

Government data on Monday showed Japan's industrial output rose 5.9 percent in May from the previous month, matching the fastest pace in 56 years. Exports have also shown signs of having bottomed out after a severe slump.