Tuesday June 30, 10:17 AM
Japanese unemployment hits five-year high
By Miwa Suzuki
TOKYO (AFP) - Japan's unemployment rate rose to its highest level in more than five years as firms slashed jobs to cope with the worst recession since World War II, government data showed Tuesday.
On a brighter note, consumer spending rose for the first time in 16 months, supported by the government's economic stimulus efforts.
The unemployment rate climbed to 5.2 percent in May -- a level last seen in September 2003 -- up from 5.0 in April, the internal affairs ministry said.
Hopes are mounting that Japan's economy has come through the worst of its export and production slump, but there are fears that unemployment will rise further as companies seek to recover from heavy financial losses.
The jobless rate, which was slightly worse than expected, is close to a post-World War II high of 5.5 percent, which was last seen in April 2003.
The number of people in unemployment rose by 770,000, or 28.5 percent, from a year earlier to 3.47 million.
Many Japanese companies, particularly exporters, have moved swiftly to cut jobs and production in response to a slump in demand caused by the global economic downturn.
There were only 44 job offers for every 100 job seekers in May, a record low and down from 46 in April, a separate report from the labour ministry showed.
But some analysts expressed optimism that the jobs market situation may start to stabilise before long.
"The jobless rate worsened slightly but is almost peaking out," said Hideyuki Araki, an economist at the Resona Research Institute.
"We are not in a vicious spiral of higher unemployment prompting consumers to tighten their purse strings, further damaging corporate earnings," he said.
But others are more pessimistic.
The unemployment rate is likely to approach six percent by mid-2010, warned Morgan Stanley (NYSE: MS - news) economist Takehiro Sato.
Despite the worsening jobs market, Japanese household spending edged up 0.3 percent in May from a year earlier, marking the first increase in 16 months, government data showed Tuesday.
Consumer spending is being propped up by the government's economic stimulus measures, but the boost will eventually fade, said UBS (Virt-X: UBSN.VX - news) economist Takuji Aida.
Spending will show "only a slight rise" in the July-September quarter because of a weak jobs market and sluggish wages, he said.
The government has announced a series of emergency spending packages to revive Asia's biggest economy, including cash handouts for households and incentives to buy fuel-efficient cars.
Other data underscored the weak state of the Japanese economy. Construction orders received by major 50 companies in May plunged 41.9 percent from a year earlier, the steepest drop since comparable records began in 1985.
Housing starts fell 30.8 percent in May from a year earlier, after a 32.4 percent drop in April that was the worst since 1974.
Japan entered recession in the second quarter of 2008 as its heavy reliance on overseas markets as an engine of economic growth left it vulnerable to the fallout from the global economic crisis.
The economy suffered its worst contraction in the first quarter of 2009 since comparable records began in 1955, shrinking at an annualised pace of 14.2 percent.
Experts say a full-fledged recovery is unlikely in Japan until demand picks up in major overseas markets such as the United States and Europe.
Reflecting the tough conditions facing many companies, the government said Tuesday it would invest 30 billion yen (310 million dollars) in troubled chipmaker Elpida Memory Inc as part of a 160-billion-yen rescue package.
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