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UPDATE 1-Japan Oct industrial output rebounds, manufacturers see good times ahead

ahead@ (Adds breakdown of industrial output, economic context)

* Oct industrial output +0.5 pct vs f'cast +1.9 pct

* Manufacturers see output +2.8 pct in Nov, +3.5 in Dec

* Overseas demand expected to help Japan's economy

TOKYO, Nov 30 (Reuters) - Japan's industrial output rose less than expected in October, but companies forecast production to rise strongly in November and December as robust overseas demand continues to support factory activity and broader economic growth.

The 0.5 percent increase in October was less than the median market projection for a 1.9 percent increase and followed a revised 1.0 percent decline in September.

Forecasts for an acceleration in factory output suggest Japan could extend its longest uninterrupted period of growth in more than a decade as exports and domestic demand drive the economy.

Industrial output rose in October due to increased production of semiconductors, car parts, and machines used to make flat panel displays, trade ministry data showed on Thursday.

Manufacturers surveyed by the Ministry of Economy, Trade and Industry expect output to rise 2.8 percent in November and 3.5 percent in December.

The industrial output data is yet another reason for optimism about the economic outlook.

Many economists expect consumer spending to rebound in the second half of this year due to a tight labor market.

Capital expenditure is also likely to continue expanding as companies invest in new equipment to deal with labor shortages and capacity constraints, economists say.

Japan's economy grew faster than expected in the third quarter thanks to strong exports, posting the longest period of uninterrupted growth in more than a decade, data showed earlier this month.

The Bank of Japan is likely to point to the country's steady economic growth as an indication that price pressures will eventually build up and inflation reach the central bank's 2 percent target.

(Reporting by Stanley White; Editing by Sam Holmes)