U.S. automaker Chrysler has filed for bankruptcy and entered an industry-changing deal with Italy's Fiat , in the latest big government intervention in the economy to try to deal with the global crisis.

It's a partnership that will give Chrysler a chance not only to survive but to thrive in a global auto industry, President Barack Obama said after weeks of talks with creditors to restructure Chrysler's debt broke down.

But some analysts warned that Chrysler's bankruptcy and the wider woes of the U.S. car industry could damage tentative signs that the economy is starting to pick up after months of crisis.

It will create a great deal of uncertainty for the industry and suppliers, said Bill Kohlder, co-chair of Butzel Long's Global Automotive Practice.

Many world markets were closed for a holiday, but oil retreated below $51 a barrel on the news.

Although difficulties of the U.S. auto makers have been pretty much factored in, Chrysler's bankruptcy will have some impact on sentiment, said David Moore, chief commodities analyst at the Commonwealth Bank of Australia.

More gloomy news from Japan showed that despite signs of some green shoots in the world economy the crisis is not over.

Data released on Friday showed the country had slipped back into deflation less than two years after last escaping it, and unemployment was rising at a record pace.

The Bank of Japan has forecast two years of deflation and Takeshi Minami, chief economist of Norinchukin Research Institute, said the price falls will accelerate.

Deflation will be damaging to the economy. Companies will have difficulty increasing profits, and their effective burden from borrowing money will increase.

Japan's jobless rate jumped to a four-year high of 4.8 percent with the availability of work sinking to a seven-year low with only half as many jobs as applicants.

But despite the downbeat data, the Nikkei <.N225> closed at its highest level in almost four months, lifted by optimism about the global economy and investor hopes the weaker yen will boost exports.

Markets are also being supported by signs that any flu pandemic will be less serious than was originally feared.

OBAMA PLAYS HARDBALL

Obama hailed the bankruptcy of Chrysler, which makes iconic brands such as Jeep and Dodge, as critical step in saving 30,000 jobs at Chrysler, majority-owned by Cerberus Capital Group , and hundreds of thousands more at affiliated firms.

The deal will allow Fiat to own up to 35 percent of Chrysler as it makes investments in U.S. operations and small-car technology. Over time, Fiat could eventually own 51 percent after Chrysler has repaid its loans to the U.S. Treasury.

The Chapter 11 filing, in U.S. Bankruptcy Court in Manhattan, has implications for the entire industry -- including Chrysler's rivals and suppliers.

The bankruptcy signals that Obama is prepared to play hardball with holdout lenders rather than knuckle under to their demands and will likely set the tone for similar discussions with bondholders of General Motors -- which is now on the clock to restructure its operations by the end of May.

Economic data from Korea provided more evidence of green shoots -- exports fell less than expected in April and export earnings per day rose for the third month running.

Exports from Asia's fourth-largest economy slid 19.0 percent in April from a year earlier and imports fell 35.6 percent. Both falls were smaller than expectations for a 23.2 percent drop in exports and a 36.3 percent fall in imports.

The monthly growth (in exports value per working day) is pretty impressive because I had expected a decline for April. The data adds to the latest hopeful signals, said Oh Suk-tae, an economist at Citigroup.

The data came after more encouraging signs in the United States, where the number of workers filing new claims for jobless benefits unexpectedly fell in the latest week by 14,000 to a still-high 631,000.

That data, taken with a slightly more robust employment reading from Germany and an improvement in Japan's industrial output for the first time in six months, helped to brighten global stock market sentiment on Thursday.

The cumulative weight of the evidence over the last several weeks is that the economy is moving closer to a trough, said David Resler, chief economist at Nomura securities in New York.

The Chicago purchasing managers index jumped unexpectedly to its highest level since September and its upbeat tone was mirrored in regional surveys from Milwaukee and Kansas City.

(Writing by Andrew Marshall; Editing by Jan Dahinten)

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