Tokyo: Japanese unemployment rose to a three-year high in February as a deepening recession put more people out of work, underlining government urgency to come up with fresh stimulus for the world’s second-largest economy.
Prime Minister Taro Aso is expected to unveil the outline of a new stimulus package later on Tuesday, ahead of a gathering of G-20 rich and major developing countries later this week, but many analysts expect the country’s economic gloom to persist.
Aso will likely express the government’s willingness to sell more bonds to finance the stimulus, with some ruling party lawmakers calling for an extra budget of more than ¥10 trillion ($102.5 billion), the Asahi Shimbun newspaper reported.
“Japan’s economy is likely to have hit bottom in the first quarter of this year,” said Junko Nishioka, chief Japan economist at Royal Bank of Scotland.
“In usual times, it would then start to pick up, but now we can’t expect that to happen. That means companies won’t be able to raise cash flow and therefore will continue to cut jobs.”
Japan’s seasonally adjusted unemployment rate rose to 4.4% in February from 4.1% in January, data showed on Tuesday, higher than a median market forecast of 4.3%.
Household spending slid 3.5% in February from a year earlier, while available new jobs sank to a six-year low, suggesting weak domestic consumption will continue to weigh on growth as exports slide amid the global economic slowdown.
The yen slipped to $98.22 following the data, while stocks rose nearly 1% on hopes the government will buy shares in a bid to restore consumer confidence and ease the strains on Japanese companies.
Some analysts say unemployment may top 6%, with rising joblessness heaping more political pressure on Aso ahead of the G-20 summit in London and an election later this year.
Aso, who has been has performing badly in opinion polls, has scheduled a news conference for 5pm, at which he is expected to map out a new stimulus plan that Japanese media say is aimed at creating 2 million jobs.
New jobs dry up
At the heart of Japan’s problems is a halving of exports in the space of a year as demand in its key export markets slumps, leaving its big car and tech manufacturers scrambling to lay off staff, cut production and slash orders from their suppliers.
Without a recovery in exports or domestic demand, it will be tough for the government to arrest the jobless trend.
The purchasing managers index, an early indicator of the health of the sector, showed Japanese manufacturing activity shrank for the 13th consecutive month in March, although not as deeply as in February.
Japan’s jobless rate is still lower than the United States and the eurozone, but is the highest since early 2006.
Hit by plunging global demand and weak consumption at home, Japan’s export-reliant economy shrank 3.2% in the fourth quarter, its fastest decline since the 1974 oil crisis and twice as fast as the U.S. and euro zone economies.
Analysts expect Japan’s economy to keep shrinking in the first half of the year - meaning a record five quarters of contraction.
Wage earners’ total cash earnings fell for the ninth straight month in February with overtime pay, a barometer of strength in corporate activity, marking a record fall, a sign companies were cutting labour costs to cope with the global economic slump.
Tumbling share prices are also a concern and a panel of the ruling Liberal Democratic Party said it would come up with a plan for Aso to allow a government agency to buy shares from the market.
Highlighting the lack of confidence in the domestic and global economies, the Bank of Japan’s closely watched tankan survey due on Wednesday is expected to show sentiment among big manufacturers tumbled to the lowest since 1975.