Japan’s Jobless Rate Hits Record 5.7% in Blow to Aso
Monitor
Japan’s Jobless Rate Hits Record 5.7% in Blow to Aso
Aug. 28, 2009 (Bloomberg) -- Japan’s unemployment rate rose to a
record 5.7 percent in July and deflation worsened, dealing a blow to
Prime Minister Taro Aso on the eve of an election that polls indicate
his ruling Liberal Democratic Party will lose.
The jobless rate rose more than economists estimated, surpassing the
previous record 5.5 percent last seen in April 2003, the statistics
bureau said today in Tokyo. Consumer prices dropped an unprecedented
2.2 percent from a year earlier.
Yukio Hatoyama’s Democratic Party of Japan may end the LDP’s 54-year
grip on power as jobs vanish in the wake of the country’s worst
postwar recession. Household spending slid 2 percent last month,
indicating Aso’s cash handouts as part of a 25 trillion yen ($267
billion) stimulus plan are failing to spur demand among consumers
whose wages are falling.
“The economy is the key factor for the election,” said Masamichi
Adachi, senior economist at JPMorgan Chase & Co. in Tokyo. “Voters
naturally direct their frustrations about the slumping economy at the
incumbent government.”
The yen traded at 93.69 per dollar at 1:05 p.m. in Tokyo from 93.60
before the reports were published. The Nikkei 225 Stock Average gained
0.2 percent. The yield on Japan’s 10-year bond rose one basis point to
1.31 percent.
The DPJ is projected to win more than 320 of 480 seats in the Aug. 30
lower-house election, according to an Asahi newspaper survey published
yesterday. Finance Minister Kaoru Yosano said this week the opposition
party is “engulfing Tokyo like a massive wave.”
Exports Tumble
Companies from Toyota Motor Corp. to Japan Airlines Co. are scaling
back and cutting jobs as sales weaken at home and abroad. Exports fell
36.5 percent in July, a tenth monthly drop, as demand from all of the
nation’s major markets deteriorated.
Economists surveyed by Bloomberg predicted the unemployment rate would
increase to 5.5 percent from 5.4 percent in June. The rate is the
highest since the government began collecting the data in 1953, a year
after the U.S. military occupation ended. The LDP has governed Japan
for all but 10 months since 1955.
More than $2 trillion in stimulus plans worldwide helped the world’s
second-largest economy grow at an annual 3.7 percent pace last
quarter, the first expansion in more than a year. Economists expect
growth will weaken in coming quarters once the government cash
injections are exhausted.
Job Prospects
The jobs-to-applicants ratio, a leading indicator of employment
trends, fell to a record 0.42 in July, meaning there are only 42
positions for every 100 candidates, the Labor Ministry said today. The
number of unemployed rose by 200,000 from June, the biggest increase
since March.
“We are very far from a solid recovery,” said Yuichi Kodama, chief
economist at Meiji Yasuda Life Insurance Co. in Tokyo. “There’s a high
risk for a more serious labor adjustment going forward” as companies
offload workers they no longer need, he said.
Toyota, Japan’s biggest automaker, said this week that it will shut
down a domestic assembly line as sales plunge. Japan Airlines, Asia’s
largest carrier by sales, may cut 5,000 jobs in three years, Kyodo
News reported. Isetan Mitsukoshi Holdings Ltd., Japan’s largest
department store chain, plans to eliminate 1,000 jobs by March, Nikkei
English News said.
The jobless rate would be around 12 percent if all of Japan’s excess
workers were considered unemployed, according to Takahide Kiuchi,
chief economist at Nomura Securities Co. in Tokyo.
‘Want a Promise’
Hisako Abe, 53, signed up for a computer-training course in an effort
to find regular work.
“I want to be a full-time employee, or at least have a part-time job
that’s stable,” Abe, who was laid off in April, said at an
unemployment office in Tokyo. “I want a promise that they won’t fire
me right away.”
Deflation is also threatening the recovery. Last month’s drop in
prices excluding fresh food, which matched economists’ estimates, was
the steepest since the survey began in 1971.
“Nothing can stop prices from falling now, given that demand has
deteriorated so much,” said Masaaki Kanno, a former central bank
official and now chief economist at JPMorgan Chase & Co. in Tokyo.
Consumers, whose spending accounts for more than half of the economy,
may delay purchases if they expect goods to get cheaper. That would
erode profits and force companies to keep cutting wages, which tumbled
an unprecedented 7 percent in June.
Bank of Japan board member Atsushi Mizuno said last week that policy
makers should “be prepared to fight a long-term battle” with
deflation. The central bank, which has cut the key interest rate to
0.1 percent, has few tools to prop up inflation and economic growth in
the short term, he said