Japan job market tightens as spending recovers

TOKYO, July 29, 2014 (AFP) - Japan's job market is tightening despite a rise in the unemployment rate, official data showed Tuesday, as consumer spending recovers from April's sales tax hike.

The fresh figures suggest that activity has held up despite fears the increased levy would hit a recovery in the world's number three economy, analysts said.

Japan hiked its sales tax to 8.0 percent from 5.0 percent on April 1 in a bid to tame the country's massive national debt, one of the heaviest burdens among rich nations.

Millions made a last-minute dash to stores in a national buying spree before prices rose - followed by an immediate drop in spending that some feared would dent producers and curb their expansion plans.

On Tuesday, official data showed that Japan's unemployment rate ticked up to 3.7 percent in June, from 3.5 percent in May, which was the lowest in nearly 17 years.

But the ratio of job offers to job seekers was sitting at a 22-year high of 1.10, meaning there were 110 job offers for every 100 people looking for work, with the figures also showing more women entering the workforce.

The rise in both job offers and joblessness suggest more people have started looking for work as they see the labour market improving, leading them to be counted as job-seekers, which in turn pushes up the unemployment rate.

Separate data Tuesday showed retail sales inched up 0.4 percent month on month in June, much slower than the 4.6 percent seen in May.

The broader measure of household spending slipped 3.0 percent on-year, smaller than drops of 8.0 percent in May and 4.6 percent in April just after the tax hike.

The spending figures suggest the upward momentum was likely to continue, analysts said.

"Today's data showed the second consecutive rise in retail sales following April's plunge and a tightening labour market suggests that the recovery in consumer spending should continue in coming months," said Marcel Thieliant of Capital Economics.

"The current level of (job) vacancies still points to further declines in the jobless rate in coming months," he said in a research note.

Fears about the latest tax rise were exacerbated by a downturn in 1997 that followed a levy hike, but much of the earlier weakness was due to the Asian financial crisis, Thieliant said.

"Fortunately, a disruption to Japan's trade and financial sector of a comparable magnitude is unlikely to materialise," he said.

However, wage growth has been weak as Japanese consumers face rising prices, after years of deflation.

The Bank of Japan (BoJ) has set an ambitious 2.0 percent inflation target for next year as part of a wider government push to conquer years of falling prices that held back the wider economy.