The October numbers were largely aided by demand from Asian countries for parts used in smartphones, the Economy, Trade and Industry ministry said, Kyodo News reported.
In September, the output contracted 4.1 percent from August, the sharpest drops since March 2011, when Japan's economy was hit by the devastating earthquake and tsunami.
The October increase may offer optimism amid fears of another recession. Japan's gross domestic product in the July-September quarter contracted 0.9 percent from the previous quarter, and another contraction in the current quarter could push the economy into a recession.
The October improvement was contrary to expectations of a decline of 2.2 percent for the month because of the eurozone crisis and the ongoing island territorial dispute with China that has hit Japan's exports, The Wall Street Journal reported.
The Journal said Japanese ministry officials, despite the October change, did not change their assessment that output is on a downward trend.
The ministry said companies expect output to fall 0.1 percent in November before rebounding sharply in December.
The Journal said while the latest output figure may not encourage the Bank of Japan to further relax monetary policies, other consumer price numbers showed Japan's deflationary pressure has not eased.
Japan will hold early parliamentary elections Dec. 16, and the ruling Democratic Party of Japan led by Prime Minister Yoshihiko Noda, which has been in office since 2009, is expected to face a tough challenge from the main opposition Liberal Democratic Party.