Japan's jobless rate hits record 5.5%


Japan's jobless rate is expected to worsen in the months ahead

By staff and wire reports

TOKYO, Japan -- Japan's unemployment rate climbed to a record high 5.5 percent in November as bleaker economic conditions forced companies to shed more workers.

The new jobless figures come a day after the government released data showing a further decline in industrial output, and the yen reached a three-year low against the U.S. dollar of 132.08.

Japan's industrial production fell 1.8 percent in November to the lowest level in 14 years, the Ministry of Economy, Trade and Industry reported Thursday. Separate figures showed a drop in retail sales.

"We're seeing a higher number of people leaving their jobs involuntarily. Most of them are male, aged 45 to 54, heads of households," a government official told a news conference Friday.

Government data released on Friday also showed that consumer prices continued to slide in November, reinforcing fears Japan is slipping deeper into its fourth recession in a decade.

But Economics Minister Heizo Takenaka said that while the risk of a deflationary spiral existed, he thought it could be avoided.

ING Barings chief economist for Japan, Richard Jerram, told CNN television Friday morning that he expected the jobless rate would keep on rising because the demand for labor was continuing to slide.

Some bright signs


Industrial production continued to decline in November

But Jerram said there had been a few "moderately bright signs" for the Japanese economy in recent weeks. The slide in exports was easing, while the inventory buildup seen earlier in the year was being reduced.

He said the weaker yen would also support some export-oriented industries.

The yen has weakened sharply from 120 to the U.S. dollar in the past month and was just under 132 in early trade Friday.

"The stage is set for things to at least not get worse from the middle of 2002," Jerram said.

In a note issued Thursday, Jerram pointed out that small business confidence rose in December for the first time more than a year.

"This adds to the evidence that the worst is over for the economy, and that the cycle should hit bottom in early FY02," he wrote.

But Jerram told CNN the Japanese government's budget, which sees a 1.7 percent spending cut in the year starting next April, was "quite negative" and taking the wrong tack for an economic recovery.

Prime Minister Junichiro Koizumi's cabinet adopted a tough 2002 budget on Monday. It goes to Japan's parliament in January.

Expectation of 6% by mid-year


Economists say Japan's manufacturing sector is shedding workers quite rapidly

There is a widespread expectation the jobless rate will reach 6.0 percent by mid-2002. It has been rising steadily from 4.9 percent at the start of 2001.

Trade Minister Takeo Hiranuma said Friday he expected the rate to continue to worsen for a while longer. He said it would take more time for the effects of previous extra budgets and the initial budget for the next fiscal year to be felt in the job market.

"The manufacturing sector in particular seems to be cutting its workforce quite rapidly," Tsurukazu Nakamura, an economist at Fuji Research Institute, told Reuters.

"But judging from the most recent 'tankan' survey, manufacturers still have an excessive workforce and we'll likely see them shed more employees, especially toward the end of the fiscal year in March."

The Bank of Japan's latest quarterly tankan survey of business sentiment, unveiled earlier this month, showed that large manufacturers in particular felt they had too many workers.

The November data showed the number of unemployed rose year-on-year for an eighth straight month to 3.50 million -- up 410,000 from the same month a year ago.

Officials said more firms seemed to be cutting full-time jobs while employing more part-time workers on short-term contracts.

Consumer prices still falling

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Separate data showed little immediate impact on household spending in November, with spending by wage earners up a real 3.6 percent from the same month a year earlier.

But data also showed consumer prices continuing to decline. The nationwide core consumer price index (CPI) fell 0.8 percent in November from a year earlier, dropping for the 26th straight month.

The core nationwide price index, which excludes volatile fresh food prices, is a closely watched indicator because the central bank has said it would maintain its policy of "quantitative easing" until the year-on-year change in the index stabilises at zero or above.

In March, the Bank of Japan decided to ease credit by flooding the market with cash.

Data for the Tokyo area, which come out a month before the nationwide figures, suggested the trend for weaker prices would continue. Core CPI in the metropolitan area fell 1.0 percent in December from a year earlier, marking a 27th consecutive month of decline.

Economics Minister Heizo Takenaka said on Friday he thinks Japan can avert a deflationary spiral.

"The risk is there but we have compiled a medium-sized (second) extra budget, so a deflationary spiral can be averted for the time being," he told a news conference.

Reuters contributed to this report.