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Japan unemployment rising

Tokyo, May 2, 2009

Japan has edged back into deflation, less than two years after it last escaped it, and joblessness is rising at a record rate, according to a report.

This has added to the strains for the Japanese economy even as hard-hit manufacturers show signs of stabilising.

Analysts expect deflation to accelerate to a record rate in coming months as the worst global recession in 60 years forces companies to cut prices, on top of sharp falls in commodity prices.

Adding to the pain, Japan's jobless rate jumped to a four-year high of 4.8 per cent with the availability of work sinking to a seven-year low with only half as many jobs as applicants.

The Bank of Japan has forecast two years of deflation and Takeshi Minami, chief economist of Norinchukin Research Institute said price falls will accelerate.

"Deflation will be damaging to the economy. Companies will have difficulty increasing profits, and their effective burden from borrowing money will increase," Minami said.

"With job conditions worsening, consumption will remain weak. As such, downward pressure from weak demand on consumer prices will continue."

The core consumer price index, which excludes volatile prices of fresh fruit, vegetables and seafood but not oil prices, dipped 0.1pc in March from a year earlier.

Though smaller than the 0.2 per cent slip forecast by economists, it was the first annual decline since late 2007.

Prior to that, Japan had suffered mild deflation since the late 1990s, and some analysts warn of five more years this time around.

The so-called core-core price index, which strips out both energy and food and is similar to the core index used in many other developed countries, fell 0.3pc, with a wider range of products facing downward price pressure. – TradeArabia New Service

Tags: Tokyo | jobless rate | Deflation | Bank of Japan |

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