Japan's economy shed 230,000 jobs in January, the biggest decline in four months, and more people will join unemployment lines as Hitachi Ltd and Misawa Homes Ltd offer thousands of workers incentives to quit.
Companies are trimming costs as falling prices wreck earnings. Consumer prices fell a record 1.4 percent in January from a year ago, as Japan's 2 1/2-year bout with deflation worsened.
Job losses may accelerate this month as companies try to complete severance plans before the March 31 end of the fiscal year so they can put billions of yen in charges behind them. The jobless rate will resume rising after unexpectedly falling to 5.3 percent in January, analysts said.
"The outlook is really dim," said Susumu Okano, the chief economist at Daiwa Research Institute of Research Ltd, who expects the jobless rate to rise a full percentage point in the next year.
"Falling incomes and prices are hurting companies, leading to cuts in production, business spending and jobs." The jobless rate fell for the first time in 11 months, from a revised 5.5 percent in December, as people gave up looking for work as jobs become scarcer. Economists had expected the jobless rate to rise to 5.7 percent from December's initial estimate of 5.6 percent.
December's unemployment rate is the highest on record. Government officials downplayed the drop in the jobless rate.
"The trend is still not good," Finance Minister Masajuro Shiokawa said. Economy Minister Heizo Takenaka said the job situation remains "tough." The yen fell against the dollar on optimism the US is pulling out of recession while Japan remains locked in its third in a decade.
The yen was recently at 133.61 to the dollar, down from 133.36 late yesterday.
The main Nikkei 225 stock average rose 2.1 percent, rounding out a three-day, 6 percent rally and its biggest weekly gain in five months.
The lack of jobs is fueling disenchantment among the unemployed.
The participation rate, which measures the proportion of the workforce with a job or looking for one, fell to 60.6 percent from 61.4 percent in December.
The number of people not looking for work rose by 1.2 million from a year earlier to 43 million, a record.
"More people are discouraged about looking for jobs," said Taro Saito, an economist at NLI Research Institute.
Jobs are getting scarcer. A Labor Ministry report showed there were 51 jobs for every 100 applicants at state-run work centers in January, or two people chasing each job. That's down from 65 jobs for every 100 applicants a year ago.
A total of 3.55 million people are registered as unemployed, the government said. The real figure is probably twice that, said Kiyoshi Sasamori, the chairman of Japan's biggest trade union group.
"It's just so scary," said Sasamori, who leads the Japan Trade Union Confederation, or Rengo.
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