Japan’s jobless rate hit a six-year high of 5.4 percent in June and deflation deepened as Asia’s biggest economy wrestled with the fallout from its worst recession in decades, data showed yesterday.
Reeling from plunging profits, Japanese companies shed thousands more workers, putting the unemployment rate on course to rise above its post-World War II high of 5.5 percent, last seen in April 2003.
The jobless rate will probably climb above 6 percent early next year, said Hiroshi Shiraishi, an economist at BNP Paribas.
“A lot of large corporations have been holding off slashing regular workers. But as it becomes clear that sales aren’t going to recover much they will eventually have to start more aggressive restructuring,” he said.
Hopes are mounting that Japan’s economy has come through the worst of its export and production slump, but unemployment tends to lag behind economic growth in recovering from a recession.
The number of people out of work in June increased by 830,000, or 31.3 percent, from a year earlier to 3.48 million, lifting the jobless rate by 0.2 points from May when it stood at 5.2 percent, the government said.
There were only 43 job offers for every 100 job seekers, a record low and down from 44 the previous month.
Despite the worsening jobs market, Japanese household spending edged up 0.2 percent in June from a year earlier, adjusted for price changes.
Deflation deepened with core consumer prices falling a record 1.7 percent in June from a year ago.
Core prices, which exclude those of volatile fresh food, fell for the fourth straight month after a 1.1 percent drop in May.
“Deflation’s establishing more of a foothold,” said Jan Lambregts, head of research at Rabobank Global Financial Markets in Hong Kong.
Japan was stuck in a deflationary spiral for years after its asset price bubble burst in the early 1990s, prompting consumers to put off purchases in the hope of further price drops and reducing corporate earnings.
Analysts say that the current price falls reflect the effects of falling energy costs — good news for the economy — and weak domestic demand, which is more of a worry.
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