Tankan Shows More Japanese to Lose Their Jobs, Prolonging Slump

By Jason Clenfield

April 2 (Bloomberg) -- Job prospects for Japanese workers just got worse.

The Bank of Japan’s Tankan survey yesterday showed plunging demand has saddled companies with too many employees, signaling more people may lose their jobs. Rising unemployment threatens consumer spending, the strongest part of an economy that shrank an annualized 12.1 percent in the fourth quarter.

“We’re running into a domestic crisis,” said Martin Schulz, a senior economist at Fujitsu Research Institute in Tokyo. “This started with exports but the infection has spread; we’re going to see another round of layoffs.”

The quarterly Tankan index of labor supply at Japan’s biggest companies rose to 20, the highest level since March 2003. A positive number indicates an excess of workers.

Japan’s unemployment rate climbed to a three-year high of 4.4 percent in February and economists surveyed last month said it will reach 5.5 percent in the first quarter of 2010, matching a postwar high set in April 2003.

An unprecedented collapse in sales abroad has already prompted companies from Nissan Motor Corp. to Panasonic Corp. to fire thousands of workers, cut production and restrain wages.

Confidence among large manufacturers slid to minus 58, the lowest since the quarterly Tankan survey began in 1974, the central bank said. Sentiment at the country’s biggest service companies fell to minus 31 from minus 9, a record drop.

Next Victim

“The really bad news is that domestic non-manufacturers are now expecting to get hammered by the crisis,” Schulz said. “Falling employment and decreasing household demand makes them the next victim.”

Consumer spending fell 0.4 percent in the fourth quarter from the previous three months, a fraction of the record 13.8 percent drop in exports that drove the worst quarterly contraction in gross domestic product since the 1974 oil crisis.

The deteriorating job outlook has since started to take a toll. Retail sales dropped at the fastest pace in seven years in February and weakening demand prompted supermarket operators Ito-Yokado Co. and Seiyu Ltd. to cut prices of food, clothing and household products last month.

Nippon Steel Corp., the world’s second-largest mill, said yesterday it will require workers at five domestic plants to take one or two extra days off a month and cut executive pay.

Employees on temporary contracts have borne the brunt of the job cuts. The Labor Ministry estimates that 192,061 non- regular workers will have lost their jobs by June since October.

Safety Net

Some 90 percent of workers are worried about being fired or having their pay reduced, a separate central bank survey showed yesterday. Prime Minister Taro Aso this week promised new spending by mid-April to help patch a benefit system that covers less than a quarter of the country’s unemployed.

“They’ve got what looks like a safety net but in the real world it doesn’t work,” said Jesper Koll, chief executive officer at hedge fund TRJ Tantallon Research Japan in Tokyo.

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 government will offer money to unemployed workers of Japanese descent to return to their native countries in exchange for giving up their permanent and residential visas, the Health Ministry said on March 31.

To contact the reporter on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net