Japan's Jobless Rate Rises to 4.2%, Household Spending Slumps

By Toru Fujioka
Enlarge Image/Details

Sept. 30 (Bloomberg) -- Japan's unemployment rate rose to 4.2 percent in August, the highest in two years, and households cut spending, signaling consumers are unlikely to support the faltering economy.

The jobless rate climbed from 4 percent in July, the statistics bureau said today in Tokyo. Household spending fell 4 percent from a year earlier, the sixth straight decline, the bureau said.

Weakening demand at home and abroad has prompted some economists to say the world's second-largest economy is already in a recession. Sentiment among large manufacturers fell to a five-year low this month, a central bank survey is expected to show tomorrow, worsening prospects for wages and hiring.

``The priority of companies is to save costs, not to hire or to increase wages, given that the economy is in a recession,'' said Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo. ``It'll probably take until the second quarter of next year before the labor market and consumer spending show clear improvements.''

The ratio of jobs available to each applicant fell for a seventh month to 0.86, the lowest since September 2004, the Labor Ministry said today. Consumer prices excluding fresh food climbed 2.4 percent in August, matching July's increase as the fastest since October 1997, and household confidence slumped to a record low. Wages grew the least this year in July.

Seiyu Ltd., the Japanese unit of Wal-Mart Stores Inc., will cut 350 jobs and close about 20 of its 390 stores, the Tokyo- based company said yesterday.

`Rapidly Shrinking'

``I can't be optimistic as we can hardly find companies being positive and aggressive,'' Kazuhiko Kamata, head of Intelligence Ltd., a Tokyo-based recruiter, said in an interview on Sept. 9. ``It's very clear demand for labor is rapidly shrinking as companies become more cautious about hiring.''

The number of job advertisements fell 14 percent last month, according to the Association of Job Journals of Japan. The average hourly wage advertised fell 0.9 percent from a year earlier, Intelligence reported yesterday on its Web site.

Rising bankruptcies are also putting people out of work. Companies that went out of business in August had a total of 13,704 employees, the most since February 2004 and 43 percent more than bankrupted firms a year ago, according to Tokyo Shoko Research Ltd. At least 60 percent of those workers will lose their jobs, the researcher said.

-- With reporting by Motoko Kakizaki and Shizuka Muragishi in Tokyo. Editors: Russell Ward, Lily Nonomiya

To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net