Japan’s Jobless Rate Rises to Five-Year High of 5.2%

By Toru Fujioka

June 30 (Bloomberg) -- Japan’s unemployment rate rose to a five-year high in May, while household spending unexpectedly advanced as the government distributed cash to help lift the economy out of its worst postwar recession.

The jobless rate rose to 5.2 percent from 5 percent in April, the statistics bureau said today in Tokyo, matching the median estimate of economists surveyed. Household spending rose 0.3 percent, the first gain in 15 months, a separate report showed. Economists expected outlays to fall 1.5 percent.

The world’s second-largest economy will probably expand for the first time in more than a year this quarter, boosted by Prime Minister Taro Aso’s stimulus measures. NEC Electronics Corp.’s President Junshi Yamaguchi said the “worst is over” and the Nikkei 225 Stock Average rose as much as 2.2 percent today, extending its gains since March 31 to 23 percent.

“We’re seeing the effects of the policy stimulus. Even though the unemployment rate is rising, production is recovering and so is consumer sentiment,” said Takuji Aida, senior Japan economist at UBS AG in Tokyo. Still, “the stimulus package will only have a large effect in the April-June quarter.”

The yen traded at 95.96 per dollar at 11:15 a.m. in Tokyo from 96.19 before the report was published. The Nikkei rose 1.9 percent to 9,968.04.

NEC’s Yamaguchi said in an interview yesterday that semiconductor orders for next quarter will jump “several percent” thanks to increased demand.

Cash Handouts

The government has given cash handouts of at least 12,000 yen ($125) to each resident, as well as tax breaks for fuel- efficient cars and incentives for buying eco-friendly televisions, refrigerators and air conditioners. The measures have helped lift consumer confidence to a 14-month high. Sales of electronics are up 18 percent since the government introduced incentives to buy energy-efficient goods, according to Tokyo- based researcher Gfk Marketing Service Japan Ltd.

The increased spending hasn’t been enough to revive business at all retailers. Takashimaya Co., Japan’s third- largest department-store chain, began its summer sales 10 days earlier than usual in a bid to spur demand. The Osaka-based company is reducing part-time workers, Hirofumi Hisasue, a senior operating officer, said after the company reported a third straight quarterly profit decline last week.

“The pressure to cut jobs is strong,” Jun Saito, chief economist at the Cabinet Office, said last week. Weak global demand means exports may not be strong enough to make up for the deteriorating job market at home, he said in an interview.

25-Year High

In the U.S., the unemployment rate rose to a 25-year high of 9.4 percent in May and is likely to climb to 10 percent by the end of the year, according to economists. The euro zone’s jobless rate reached 9.4 percent in May, the highest in a decade, economists predict a report will show this week.

Another key gauge of Japan’s labor market showed job prospects are the worst ever. The ratio of positions available to each applicant dropped to 0.44, the lowest since the survey began in 1963, the Labor Ministry said. Data yesterday showed retail sales dropped 2.8 percent in May from a year earlier, the ninth monthly decline.

“The job-to-applicant ratio was really eye catching -- the data was horrible,” said Mari Iwashita, chief market economist at Daiwa Securities SMBC Co. in Tokyo. “The jump in household consumption is only a frontloading of spending.”

A separate report today showed that wages tumbled 2.9 percent, extending the longest losing streak in five years. Summer bonuses at Japan’s largest companies will slide a record 18.3 percent this year, according to a survey published last week by Keidanren, the country’s biggest business lobby.

Salary Cut

Panasonic Corp., the world’s largest maker of plasma televisions, last week said it will cut the annual salaries of its 10,000 managers this year.

“The economy remains at a very low level even though the worst is over,” said Yasukazu Shimizu, senior market economist at Mizuho Securities Co. in Tokyo. “Companies are still seeking ways to cut costs.”

The Organization for Economic Cooperation and Development last week forecast Japan’s jobless rate will rise to an unprecedented 5.8 percent in 2010.

“The jobless rate will approach 6 percent,” said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management. “Given the deterioration in profits, more companies will feel that they have excess labor.”

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