TOKYO: Japan's unemployment rate jumped back to a post-war high of 5.5% in December as more workers bore the brunt of fading growth, piling the pressure on the prime minister ahead of a key policy speech.
Other data on Friday showed deflation was keeping its stranglehold on the economy as households hit by falling wages reined in spending, hitting consumer prices.
The grim economic news came as Prime Minister Junichiro Koizumi – who called the labour situation “severe” – prepared to give a key policy speech to parliament later in the day outlining his plans for economic recovery.
“The economy will continue to struggle along, staying flat in the first and second quarters, but may fall sharply after that,” said Michio Ichinohe, market economist at Mitsubishi Securities. “Consumer sentiment is falling, and with uncertainty over jobs and with share prices falling, people are tending to restrain spending. People see the economy getting worse.”
The government said yesterday the jobless rate rose to 5.5% in December 2002 from 5.3% in November, revisiting an equal post-war high hit last autumn.
Economists polled by Reuters had expected a jobless rate of 5.4%, and the figure would have been higher if not so many workers had given up their search for work.
Companies intent on cutting excess capacity and trimming costs are cutting workers, while others are relocating production to low-cost Asian nations, especially China.
For example, Japan's largest steel maker, JFE Holdings Inc, said earlier this week it would cut 8% of its workforce, or 4,200 jobs, over the next three years.
“Because of the severe situation in the labour market, the number of people giving up on working is rising,” BNP Paribas said in a report. “This makes the unemployment situation far worse than the figures show.”
Some economists expect unemployment to rise over 6%, a harsh situation in a country with a cultural aversion to unemployment and a lack of an adequate welfare system. – Reuters