* Yosano says recession hit bottom in January-March
* Car, IT manufacturers increasing production after big cuts
* Japan recovery depends on strength of overseas economies
By Stanley White
TOKYO, June 2 (Reuters) - Japan's worst post-war recession has already hit bottom but a full recovery may not come until early next year, Finance Minister Kaoru Yosano said, as manufacturers gradually lift output from very low levels. Japan's ratio of demand to supply was at a record low in the first quarter, data on Monday showed. This was the same quarter that gross domestic product contracted the most ever due to weak domestic investment, trade and consumption.
Japanese manufacturers have since indicated they're seeing tentative signs of a pick-up in foreign demand. The timing of Japan's recovery depends on how quickly overseas economies rebound, Yosano said, given the country's reliance on exports for most of its growth.
"The first quarter very likely marks the bottom for the economy," Yosano told a news conference after a cabinet meeting on Tuesday.
"Since then, output for a few industries has started to rebound. However, we'll probably start to see a complete recovery starting from the end of this year to spring next year."
The output gap widened to a record minus 8.5 percent in January-March from minus 4.5 percent the previous quarter, the Cabinet Office said on Monday.
This gap shows how much gross domestic product has deviated from potential GDP, or the volume of activity when the economy is running at full capacity.
Yosano said that while the output gap clearly reflects how bad the economy was in the first quarter, if you take more recent data into account then the situation has improved.
Manufacturers surveyed by the Ministry of Economy, Trade and Industry expect their output to show a jump of 8.8 percent for May and a further 2.7 percent in June after data last week showed industrial production rose 5.2 percent in April, the biggest gain since 1953.
Japanese auto and tech manufacturers have said they plan to reverse in the coming months some of last year's drastic production cuts to restock goods.
Output is still about a third lower than a year earlier. Any further gains may not be sustainable as they would likely come mainly from major governments' stimulus efforts to encourage people to buy cars and TVs, economists say.
Japan's economy shrank a record 4.0 percent in the first quarter. Economists expect GDP to expand from the second quarter as the Japanese government's $160 billion stimulus package helps domestic consumption for the remainder of the fiscal year ending in March.
Some analysts doubt whether Japanese demand will continue to grow afterwards as companies are under pressure to cut costs and the unemployment rate may rise frrom its current 5 1/2-year high of 5.0 percent. (Editing by Hugh Lawson)