Japan Jobless Rate Falls to 3.7%, Consumer Cut Back

By Toru Fujioka

Nov. 28 (Bloomberg) -- Japan’s unemployment rate unexpectedly fell in October as people stopped looking for work. Household spending fell.

The jobless rate fell to 3.7 percent last month from 4 percent in September, the statistics bureau said today in Tokyo. The median estimate of 35 economists surveyed by Bloomberg News was for unemployment to rise to 4.2 percent. Household spending fell 3.8 percent from a year earlier.

Toyota Motor Corp., world’s second biggest carmaker, said last week it will cut 3,000 contract workers, joining Isuzu Motors Ltd. and Mazda Motor Corp. in announcing job cuts. Consumers are now paring back spending because of concern about job security, rather than the risk of inflation that bothered them in the first half of the year.

“The impact of the global financial crisis is starting to threaten job security among Japanese workers,” said Masamichi Adachi, a senior economist at JPMorgan Chase & Co. in Tokyo. “There is more to come -- we expect further deterioration in unemployment and consumer spending.”

The labor force shrank by 150,000 as people stopped looking for jobs. Companies also hired 70,000, the first increase in April, the report showed.

The ratio of jobs available to each applicant fell to 0.80, the lowest since May 2004, the Labor Ministry said. Wages barely rose in September, edging 0.2 percent higher. That contributed to a drop in consumer sentiment to the lowest level on record.

Aso’s Plan

Prime Minister Taro Aso plans to respond to the worsening outlook for consumer spending in Japan by asking Japanese corporate executives next week to seek higher wages for workers, Kyodo News reported yesterday, citing people familiar with the matter. The report didn’t mention whether Aso planned to ask companies to try to retain workers.

The government and the Bank of Japan downgraded their assessments of the world’s second-largest economy this month. Japan fell into its first recession in seven years last quarter.

Companies announced job reductions after exports declined at the fastest pace in almost seven years last month, prompting production cuts.

Toyota said last week it will fire half of its 6,000 temporary workers. Isuzu, Japan’s largest maker of light-duty trucks, said it will cut 1,400 contract staff and Mazda will shed 1,300.

The Labor Ministry this month began to discuss increasing the safety net for laid-off part-time workers.

Retailers are seeing a shift in consumers’ spending habits. Food sales rose at department stores and supermarkets in October while outlays at restaurants declined, indicating households are cooking at home to save money, according to the Japan Department Store Association and the Japan Chain Store Association.

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