Japan Sees Economy ‘Picking Up’ Even as Jobs Lost

By Jason Clenfield

Sept. 8 (Bloomberg) -- Japan’s economy is recovering from its worst postwar recession, the government said, keeping its assessment unchanged for a second month even after the jobless rate climbed to a record.

“The economy is showing signs of picking up amid record unemployment and other difficult conditions,” the Cabinet Office said in Tokyo today, adding language about joblessness to phrasing it’s used since July. The report, the first since the Democratic Party of Japan won power on Aug. 30, cited overseas demand as the driver of the recovery.

Although growth resumed last quarter, the economy has only rebounded to its 2004 size and factory output is still almost a quarter below last year’s level. Saddled with idle equipment and unneeded workers, companies are cutting investment and jobs.

The unemployment rate climbed to 5.7 percent in July, the highest since records began in 1953. The increase was a reflection of low production levels, the government said.

The Cabinet Office downgraded its view of the job market, saying there’s a risk confidence may deteriorate among households, whose spending accounts for about 60 percent of the economy. A separate report today showed that sentiment among merchants fell in August for the first time in eight months.

The world’s second-largest economy grew an annualized 3.7 percent last quarter, following a record 11.7 percent contraction in the previous three months, economists expect revised gross domestic product figures to show on Sept. 11. Exports led the expansion as governments worldwide poured more than $2 trillion into their economies.

Global Recovery

Economic and Fiscal Policy Minister Yoshimasa Hayashi told reporters after the Cabinet Office release that economic conditions remain critical, with falling incomes and consumer spending risk factors.

The global recession is bottoming, the government said today, raising its assessment of the world economy for a third month. China’s 4 trillion yuan ($585 billion) in public spending is helping generate demand in an economy that this year passed the U.S. as Japan’s biggest export customer.

Hayashi said policies haven’t spurred consumer demand.

Job prospects have worsened and workers are enduring the biggest pay cuts on record.

Still, government incentives to encourage the purchase of fuel-efficient cars boosted domestic revenue for companies including Toyota Motor Corp., whose sales of its Prius hybrid almost quadrupled in July.

The automaker said today it will hire about 800 temporary workers to meet “possible” production increases as government subsidies at home and abroad revive sales. Toyota still plans to build about a third fewer cars this year than the 10 million vehicles it has the capacity to make.

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