Asia Times: Japan's jobless rate up to record 4.8% in March



	May 05, 1999	atimes.com

Japan Economy

Japan's jobless rate up to record 4.8% in March
By Nathan Westby
Bloomberg News

Tokyo - Japan's unemployment rate rose for a second month as more companies began to shed workers and streamline operations in an effort to survive the country's longest recession.

The jobless rate rose to a record 4.8 percent last month from 4.6 percent in February, the government's Management and Coordination Agency said. In March, there were a seasonally adjusted 64.51 million people working, down 0.4 percent from February, the fourth straight decline. Economists surveyed by Bloomberg News expected a jobless rate of 4.7 percent.

''I won't be surprised if Japan's jobless rate reaches a double-digit figure in the near future,'' said Hidehiko Fujii, senior economist at Japan Research Institute. ''We expect companies to accelerate their restructuring steps this year and so a surge in the jobless rate will take place."

Most of the job cuts announced have been at large firms, the likes of Sega Enterprises Ltd. and Toshiba Machine Co. - the kind of sprawling industrial groups that built the ''miracle'' economy from the ashes of World War II. Now, with the economy shrinking companies must limber up to compete with leaner rivals. Casio Computer Co. joined the list this week, more than doubling its loss forecast and warning it may cut jobs to return to profits.

Together with separate figures released Friday showing household spending rising at less than half the rate analysts forecast and overtime hours falling, the rising jobless rate points to an economy still struggling to recover. Only the prospect of a fresh injection of government money into public works may prevent the economy from worsening some more.

''To a large extent government measures will prohibit a substantial lay-off,'' said Akio Yoshino, senior economist at Credit Suisse Asset Management in Tokyo. Even so, ''that does not necessarily mean that employment numbers as a whole will improve any time soon."

Japan's unemployment rate has been rising since 1992 when it was as low as 2.0 percent. Last November, for the first time, the rate was the same as in the U.S. The U.S. rate fell to 4.2 percent in March, pushing the gap between the jobless rates of the world's two largest economies to its widest in a year - with the twist that Japan's is now higher, and keeps climbing.

Japanese government bonds rose and the benchmark Nikkei 225 stock index dropped as investors bet the economy won't recovery anytime soon.

Unemployment has risen steadily for seven years, a period during which Japan's economy has either been in recession or at a standstill, as the weight of debts built up in the late 1980s and early 1990s forced companies to cut costs. Manufacturers have led the rise in unemployment in the last year, closing down unproductive factories.

The jobs-to-applicant ratio - which shows the number of job openings for each job seeker - was unchanged at 0.49 in March for the third straight month, the Labor Ministry said. Before the report, economists expected the jobs-to-applicant ratio to remain at 0.49. ''The implication is that the personal income generation process will remain in reverse gear and job insecurity will intensify,'' said Russell Jones, chief economist at Lehman Brothers Japan Inc.

The government says that a rebound in consumption, which accounts for 60 percent of the economy, is the key to economic recovery. That recovery is nowhere to be seen. Spending at Japanese salaried workers' households rose just 1.9 percent in March after falling 5.7 percent in February, according to separate figures released by the government Friday. Economists had expected a rise of more than double that amount.

Japanese are also cutting spending because wages have been falling. Wages at manufacturers with 30 or more employees each, adjusted for changes in inflation, rose 0.4 percent in March from the same month a year earlier, the first increase in 20 months, Ministry of Labor figures also released on Friday showed.

Cutting wages and other costs should allow companies to lower prices, although that hasn't happened. Tokyo consumer prices were unchanged in April from March, according to seasonally adjusted figures released Friday by the Management and Coordination Agency. In the fiscal year ended March 31, nationwide consumer prices rose 0.2 percent.

Because firms are cutting costs, but not necessarily prices, companies probably are only worried about boosting profits and not competition, one analyst said. ''The idea is that you really want to see these firms start to compete and the weaker firms weeded out, their excess capacity reduced and things like that,'' said Ron Bevacqua, senior economist at Merrill Lynch Japan Inc.

Bevacqua said it's not likely that the Bank of Japan will adopt a policy aimed at boosting inflation until it's clear that corporate Japan is in ''a long and painful transition period as under-employed people and capital are withdrawn and ultimately re- employed more efficiently."

Companies with 500 or more employees employed 1.2 percent fewer workers in March after cutting 2.7 percent of their jobs the previous month, the labor figures showed.

Among major Japanese companies that have recently announced plans to cut workers are Sega Enterprises Ltd., the world's third biggest home video game maker; Toshiba Machine Co., a plastics processing machinery maker affiliated with Toshiba Corp.; and KDD Corp., Japan's largest international phone company.

The slew of job cuts forced the government last week to announce that it will unveil plans next month to deal with rising unemployment, as steps so far have only had little success.

Increased public works spending since last year worth more than 10 trillion yen has slowed the decline in jobs in the construction industry, which employs one out of every 10 workers but when the money runs out more people will lose their jobs, analysts warned.

The government has also checked the decline in jobs at small and medium-sized companies, which employ three-fifths of the nation's workers, by boosting government guarantees of loans to small companies.

Band aid measures like that do nothing more than buy time for the government, some analysts said. They don't lay the ground needed for long-term recovery. ''The government's measures are to give companies subsidies to maintain current employment,'' said Japan Research's Fujii. ''But these steps will have only a limited, temporary impact because they don't help at all to create new businesses that can absorb workers."

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