Japan’s unemployment rate rose for the first time in four months in July, while a gauge of labor demand weakened a tad, in a pair of worrisome signals for both the Bank of Japan and the government.
(Bloomberg) — Japan’s unemployment rate rose for the first time in four months in July, while a gauge of labor demand weakened a tad, in a pair of worrisome signals for both the Bank of Japan and the government.
The jobless rate increased to 2.7% from June, the ministry of internal affairs said Tuesday. Economists had expected the reading to hold at 2.5%. The number of workers fell by 100,000 from the previous month, while those without jobs rose by 110,000. The jobless rate for women increased in all age groups, while it fell for men between the ages of 45 and 54 and between 15 and 24.
The number of people who left positions against their will rose by 50,000.
Separate data cast a cloud over the outlook for Japan’s labor market demand, with the jobs offers-to-applicants ratio slipping for the sixth time this year to 1.29 in July from 1.30. The data are a leading indicator of labor market trends, with the figures implying there were 129 jobs available for every 100 applicants.
“Looking at a leading indicator, the number of job openings in the manufacturing sector has been in a downward trend recently,” according to Kota Suzuki, an economist at Daiwa Securities. “This is likely due to the impact of declining overseas demand.”
Job offers in the manufacturing sector dropped by 11.4%. Osaka was among locales with the lowest ratio, at 1.10, while the ratio for Tokyo stood at 1.79.
While Tuesday’s figures show unemployment in Japan is still low by international standards, they suggest recent tightness in the Japanese labor market may have peaked for now. If so, it may present a problem for BOJ Governor Kazuo Ueda. A tighter labor market is needed to spur wage gains, which in turn would contribute to a virtuous cycle of inflation and salaries.
The central bank said in its July outlook report that employment will continue to grow and wage pressures will intensify. If this expectation materializes, it may alter Ueda’s recent view that there is still some distance from the 2% inflation target.
What Bloomberg Economics Says…
“Looser labor markets risk triggering a negative spiral that feeds back into softer wage growth — a frustration for the BOJ, which wants demand to fuel inflation instead of higher costs.”
— Taro Kimura, economist.
For the full report, click here.
Ueda re-emphasized at the Federal Reserve’s annual symposium in Jackson Hole last week that price growth remains slower than the central bank’s goal, thus justifying the ongoing monetary easing.
Prime Minister Fumio Kishida said earlier this month he aims to provide subsidies for firms that help dependent spouses, who face social security burdens if they earn more than ¥1 million ($6,830.5) a year. One reason why many married Japanese women avoid working more than minimal hours is that earning more than the cutoff amount means they are no longer treated as dependents and need to make separate social security payments, reducing their take-home pay.
(Adds economist’s comments, details from reports)
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