Japan’s Jobless Rate Jumps to Three-Year High of 4.4%

By Toru Fujioka

March 31 (Bloomberg) -- Japan’s recession deepened as the unemployment rate surged to a three-year high, wages fell and job openings plunged at the fastest pace in three decades.

The jobless rate rose to 4.4 percent last month from 4.1 percent in January, the statistics bureau said today in Tokyo. The ratio of jobs available to each applicant tumbled to 0.59 from 0.67, the biggest drop since 1974, the Labor Ministry said.

Companies from Toyota Motor Corp. to NEC Corp. are firing thousands of workers, increasing pressure on the government to give more assistance to the nation’s jobless, most of whom don’t receive benefits. Prime Minister Taro Aso said the government plans to unveil a stimulus package in mid-April that will include aid for households.

“We don’t think this is the ceiling for the unemployment rate,” said Kyohei Morita, chief economist at Barclays Capital in Tokyo, who expects it to reach a record 5.7 percent this year. “Manufacturers are going to keep cutting costs by suppressing employment.”

Wages slid 2.7 percent as a record slump in exports forced manufacturers to slash production and overtime. Household spending fell 3.5 percent, a 12th monthly decline, indicating domestic demand is unlikely to make up for the collapse in exports. Purchases by consumers account for more than half of the economy.

The yen fell to 98.27 per dollar at 5:57 p.m. in Tokyo from 97.36 before the reports, and is heading for its biggest quarterly loss in seven years. The Nikkei 225 Stock Average fell 1.5 percent.

Sentiment Tumbles

Sentiment among the nation’s largest manufacturers probably tumbled to its lowest level in more than 30 years, the Bank of Japan’s Tankan survey is expected to show tomorrow. Exports fell an unprecedented 49.4 percent in February from a year earlier. Factory output slid 9.4 percent from January, when it declined a record 10.2 percent, a report showed yesterday.

Suzuki Motor Corp., Japan’s fourth-largest automaker, said yesterday it will shut some domestic factories for up to seven days next month to get rid of inventories.

Overtime compensation dropped an unprecedented 18.5 percent last month as manufacturers cut extra working hours by a record 47.7 percent, today’s Labor Ministry report showed.

Aso, speaking to reporters before heading to the Group of 20 summit in London, said compiling his newest stimulus package is his highest priority and the government needs to take measures to prevent the economy from “falling apart.” Since he took office in September, Aso has announced stimulus measures in two plans totaling 10 trillion yen ($102 billion).

Debt Burden

The government’s ability to spend may be limited as the nation’s debt burden is set to rise to 197.3 percent of gross domestic product next year, the Organization for Economic Cooperation and Development said in a report today. The ratio is the highest among OECD-member countries and almost double that of the U.S., where the ratio is projected to rise to 100 percent, OECD data show.

Some 77 percent of jobless people aren’t getting unemployment benefits, the highest figure among Group of Seven nations except Italy, whose data weren’t available, the International Labour Organization said in a report last week.

“The policy response has been pretty slow in creating a safety net for unemployment, which is putting downward pressure on the whole economy,” said Noriaki Matsuoka, an economist at Daiwa Asset Management Co. in Tokyo.

The jobless rate will reach a postwar high of 5.5 percent in the first quarter of next year, according to the median estimate of 14 economists surveyed by Bloomberg News.

Oki Electric Industry Co., a maker of communications equipment, said it will cut administrative workers after weakening demand forced it to widen its loss forecast this month.

Harder to Find

New jobs are also becoming harder to find as companies try to contain costs. A total of 1,845 graduates had their job offers rescinded as of March 23, up 17 percent from February, the Labor Ministry said.

Toyota, the world’s largest automaker, this month said it will almost halve recruitment of graduates in Japan to the lowest in 14 years after forecasting its first loss in almost six decades. NEC, Japan’s largest personal computer maker, said it plans to cut new hires by almost 90 percent to 100 people.

NEC said in January that it will eliminate 20,000 jobs worldwide and Toyota plans to trim its workforce by at least 3,000.

“Japan’s labor market will keep deteriorating,” said Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo. “The question is how much consumer spending will become a drag on the economy as wages and employment conditions worsen.”

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