TOKYO (AFP) - Japan's factory output in March fell by a less-than-expected 0.3 per cent on-month, data showed Thursday, but the still-weak data underscored an uncertain recovery in the world's number three economy.

The reading from Japan's trade ministry marked an improvement from the 3.1 per cent drop registered in February, and beat the market median forecast for a 2.3 per cent drop in a survey of economists by the Nikkei business daily.

But the ministry kept its tepid view on industrial output unchanged in the monthly report, saying "industrial production shows signs of increase at a moderate pace".

A survey of manufacturers' output projections released with the data said production would turn up 2.1 per cent in April before falling back 0.3 per cent in May.