Japanese Unemployment Rate Hits 9-Year Low

To many in the West, Japan remains the land of jobs-for-life. If this was ever really true, it faded and died during the lost decade of the 1990s. The deflationary tidal wave brought the Japanese joblessness at rates that other societies might have found admirable but were beyond local tolerances. However, the April jobless rate unexpectedly dropped to 3.8% after resting at 4% the last five months. While this particular measure of economic well-being is volatile, suggesting a pinch or two of salt go along with it, it’s hard to make this look like bad news.

When measured in absolute number of employed Japanese, the picture looks very promising. The unemployment report stated, as translated by the Associated Press, “total number of jobless fell for the 17th straight month, decreasing by 160,000 from the same month a year earlier to 2.68 million. The number of job holders totaled 64.44 million, up 760,000 from a year earlier.” As more people get jobs, the price for labor should rise, making the average Japanese household better positioned to spend. Spending keeps deflation away, and although it has been gone for a while, no one wants to risk its return.

Overall household spending in April was also up, 1.1% which suggests that Japanese workers are feeling a bit more confident about their prospects. This is an important confirmation of the trend. It is quite possible for unemployment to drop, yet the employed don’t feel that their jobs are secure. This added spending means they are quite comfortable in their jobs.

The Ministry of Finance put out a separate report on retail sales, that showed a 0.6% decline in April sales compared with April 2006. This is the 7th straight month of lower retail sales. Some suggest this is a dark cloud surrounding the silver lining of better employment. However, Mizuho Research Institute senior economist Yasuo Yamamoto noted, “The cold weather may have had an impact on sales in April.” Moreover, retail spending is only part of household spending, and the broader figure is the more significant.

The Bank of Japan is now expected to increase interest rates as the economy strengthens. It should resist the temptation for a bit longer. Friday’s core consumer price index fell 0.1% in April from a year earlier, slowing from a 0.3% fall in March. Risking a little inflation is much better than a return to deflation.

© Copyright 2007 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

Home