Japan's factory output turned downward in July as manufacturers cut back on inventory stockpiles, government data showed Thursday.

Industrial production slipped 0.8 percent month on month after a revised 2.2 percent rise in June, the Ministry of Economy, Trade and Industry said.

The fall was bigger than expected, with the median forecast by economists coming in at minus 0.3 percent.

But the ministry maintained its view that manufacturing activity is on the path to recovery and said the July drop was "small," considering the robust growth in June.

Inventories fell, showing factory output "continued its recovery movements," the ministry said.

Japan's prospects have been improving on the back of strong exports, though concerns linger with inflation, which remains weak overall after years of monetary-easing efforts hampered by a lack of structural reform.