Japan's unemployment rate hits record 5 percent
Bloomberg News Service
TOKYO — Japan's jobless rate climbed to a record high 5 percent in July, triggering government subsidies to companies that hire unemployed people.
Associated Press
A record 3.38 million people were unemployed last month, pushing the jobless rate up from 4.9 percent in June, government figures showed. There were 60 jobs available for every 100 applicants at state-run job centers in July, down from 61 in June.
Toshiba Corp. President Tadashi Okamura points to a reporter for a question during a news conference in Tokyo yesterday at which the company announced it was slashing 17,000 jobs, the latest of a series of job cuts announced by Japanese manufacturers.
The jobless rate will probably continue to rise as Fujitsu Ltd., Toshiba Ltd. and other companies cut tens of thousands of workers. That may increase pressure on Prime Minister Junichiro Koizumi to spend more money to boost employment and retrain people who lose their jobs as he cuts spending on public works and forces banks to cut off borrowers who can't repay loans.
"The jobless rate is set to rise much further, given Koizumi's plans," said Yukari Sato, a senior economist at Nikko Salomon Smith Barney Ltd. The unemployment rate may rise as high as 5.5 percent by mid-next year, she said.
Koizumi's 10 percent reduction in spending on public works next fiscal year, and pledge to make Japan's biggest banks write off bad loans, will throw up to 1.7 million people out of work, according to Peter Morgan, chief economist at HSBC Securities Japan Ltd.
The government today said it will pay 300,000 yen ($2,500) to companies for every unemployed person aged 45 or older they hire. The subsidies will be paid from a 60 billion yen fund set aside in January 1999 in case the jobless rate reached 5 percent.
Economists questioned the effectiveness of the subsidies.
"Things like giving companies incentives to hire unemployed people generally aren't very effective," said Richard Jerram, chief economist at ING Baring Securities (Japan) Ltd. "We are well past the stage where these marginal policy changes are going to be sufficient. There is a notable lack of sense of crisis among policy makers," he said.
The jobless rate is really closer to 6 percent, Jerram said, because about 700,000 people who have lost their jobs in the past few months haven't registered as unemployed.
While most of the job losses in the past year have been in the construction and agricultural industries, cuts are now spreading to some of Japan's best-known technology companies, dashing hopes the information-technology industry would be an engine of job creation.
Toshiba Corp., the second-largest chipmaker, said it will cut 17,000 jobs in Japan, about 10 percent of its work force, by March 2004. Another 10,000 workers will be transferred.
Toshiba joins rivals Fujitsu Ltd., which said it would shed 5,000 jobs in Japan, as part of a 16,400-strong reduction in its global work force, and NEC Corp., which is cutting 4,000 jobs.
