The pain of Japan’s recession is spreading from the factory floor to the living room, as last month’s figures showed companies slashing output at a record pace, the jobless rate surging and household spending falling sharply.
Industrial production at the nation’s manufacturers plunged 9.6 percent in November, the largest drop since Tokyo began measuring such data in 1953, the government said yesterday. A survey predicted further declines of 9.1 percent this month and 4.7 percent next month.
Meanwhile, Japan’s unemployment rate jumped to 4.4 percent from 3.9 percent in November — the biggest increase in almost 42 years, the Ministry of Internal Affairs said. Household spending dropped a worse-than-expected 4.6 percent last month, falling for the 10th straight month.
PHOTO: AP
The global slowdown has crippled big-name manufacturers like Sony Corp and Toyota Motor Corp, which rely heavily on overseas sales to drive growth. The yen’s surge over the past few months has dealt a further blow to the world’s second-largest economy by eroding exporters’ overseas earnings.
While companies have been cutting production, payrolls and profit estimates since October, the government’s latest figures suggest that the country’s downturn is accelerating rapidly in both depth and breadth.
The bad data “changes the picture” of the recession, said Kyohei Morita, an economist at Barclays Capital in Tokyo.
It’s not just companies that are hurting but workers and families as well now, he said.
Japanese Economy Minister Kaoru Yosano expressed similar concerns, describing the deteriorating labor market as “extremely serious,” Kyodo news agency said.
“The fallout from the worldwide recession has rippled through the Japanese job market,” Kyodo quoted Yosano as saying.
The IMF estimates that Japan’s economy contracted 0.3 percent last year and on Wednesday lowered its economic forecast this year for Japan to minus 2.6 percent.
This week’s earnings results have added to the gloom.
On Thursday, Sony reported that its net profit in the October-to-December quarter plunged 95 percent to ¥10.4 billion (US$115.6 million) and reiterated that it would post a net loss for the full fiscal year through March. It is cutting 8,000 of its 185,000 jobs around the world and shuttering five or six plants — about 10 percent of its 57 factories.
Toshiba Corp also said on Thursday it expected a loss for the full year because of plummeting demand for its flash memory chips. It announced a turnaround plan that includes cutting 4,500 contract workers and delaying or canceling investments in massive new chip plants.
The government said the number of unemployed persons last month hit 2.7 million, an increase of 390,000 from the previous year.
But if companies shed even more temporary workers or expand layoffs to full-time employees, unemployment rates will keep climbing.
“When workers voluntarily give up their jobs, they often retreat from the labor market altogether, but there is a tendency for those that are made involuntarily unemployed to stay in the market and push up the unemployment rate,” said Goldman Sachs economist Chiwoong Lee in a note to clients. “We foresee further substantial increases in the unemployment rate as we expect a further increase in job terminations for non-regular workers in January-March.”
The growing insecurity over jobs and wages is forcing families to tighten budgets.
On top of the drop in household spending, the government said on Thursday that Japan’s retail sales sank 2.7 percent last month, the biggest drop in nearly four years and the fourth straight monthly decline.
The month also turned concerns about inflation into worries about deflation.
The core consumer price index, which excludes volatile fresh food prices, rose just 0.2 percent last month following a 1 percent increase in November.
Bank of Japan Governor Masaaki Shirakawa has reiterated that the country is not currently at risk of falling into a deflationary spiral.
But Lee of Goldman Sachs isn’t as confident.
“The economy is worsening too rapidly for us to completely rule out the possibility of a deflationary spiral,” which pushes interest rates higher, dampens demand and damages the economy, he wrote.
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