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Spending Up, Jobless Rate Down In Japan
Tomoko A. Hosaka | October 02, 2009

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Tokyo. Japan’s jobless rate fell and household spending rose in August, providing a double dose of good news for the world’s No. 2 economy, though it may not last.

The jobless rate unexpectedly fell for the first time since January to 5.5 percent after reaching a record high of 5.7 percent in July, the government said on Friday. Analysts had been predicting that joblessness would continue rising.

In a separate report, the Ministry of Internal Affairs and Communications said household spending rose 2.6 percent from a year earlier, lifted by one-time consumer incentives as part of government stimulus measures.

The results provide a welcome development for Japan as it emerges from its worst recession since World War II. But with an uncertain profit outlook, companies remain wary of investing in factories or workers — a deep wrinkle that could undermine the country’s nascent rebound.

A sustained increase in the number of jobs looks unrealistic for now, said Chiwoong Lee, an economist at Goldman Sachs in Tokyo.

“With corporate profits down sharply, employment conditions are weak and we think a full-fledged pickup in the employment picture is unlikely until” March 2010 at the earliest, Lee said.

Even though unemployment fell month to month, the total number of jobless in August was up 32.7 percent from a year earlier to 3.61 million, the ministry said. Those with employment fell 1.7 percent to 62.96 million from a year earlier.

A breakdown of the data shows that while the number of workers employed in manufacturing fell almost 10 percent, there was a marked rise in those employed in the care and hospitality sectors.

Men make up the majority of manufacturing job losses, said Kyohei Morita, chief Japan economist for Barclays Capital.

The ratio of job offers to job seekers in August matched last month’s record low of 0.42, the labor ministry said. That means there were 42 jobs available for every 100 job seekers.

The central bank’s quarterly survey of business sentiment on Thursday showed that companies may be more confident than three months ago, but they say they still have too many workers and too much capacity. Major manufacturers and nonmanufacturers plan to reduce capital expenditures by an average 10.8 percent this fiscal year through March.

“What they need to see is that we really have original new domestic demand. And this is simply not happening,” said Martin Schulz, senior economist at Fujitsu Research Institute in Tokyo.

The Nikkei daily reported this week that retailer Seven and i Holdings was considering closing 30 Ito-Yokado supermarkets to stem losses. Japan Airlines said it would cut 6,800 jobs by 2012.

Japan’s reliance on exports backfired after last year’s financial crisis. Between the third quarter of 2008 and the first quarter of 2009, exports fell the most among the Organization for Economic Cooperation and Development’s 30 member countries.

Associated Press