Japan unemployment falls amid recovery signs

Thu Oct 29, 9:40 pm ET

TOKYO (AFP) – Japan's economy on Friday showed fresh signs that it is recovering after a sharp downturn, with jobless figures hitting a four-month low, an easing in deflation and household spending edging up.

Japan's unemployment rate fell to a four-month low of 5.3 percent in September, beating the market expectation that it would rise to 5.6 percent, according to data from the internal affairs ministry.

The latest figure was down from 5.5 percent in August and the lowest since 5.2 percent in May.

A separate survey released by the labour ministry Friday showed there were 43 job offers for every 100 jobseekers in September, slightly up from a record low of 42 in the previous two months.

It is the first time since May 2007 that the job-offer ratio has improved from the previous month.

Many Japanese companies, particularly exporters, moved swiftly to cut jobs and production in response to a slump in demand caused by the global economic downturn.

But Japan's economy grew in April-June for the first time in five quarters on rebounding exports and government stimulus measures.

Another survey from the internal affairs ministry showed deflation in Japan eased slightly in September following four straight months of record declines in consumer prices.

Core prices, which exclude those of volatile fresh food, dropped 2.3 percent in the month from a year earlier, after an unprecedented 2.4 percent slump in August.

Compared with the previous month, prices rose 0.1 percent -- the first increase in six months.

Some economists warned against being too upbeat on the economic outlook.

"There are concerns that price drops in services and other wide-ranging sectors may pressure wages, leading consumers to seek even lower prices," Credit Suisse economists wrote in a report.

"A further credit easing is needed" as deflation remains, they said.

In September Japanese household spending edged up by 1.0 percent from a year earlier, an increase for a second consecutive month.

Japan was stuck in a deflationary spiral for years after its asset price bubble burst in the early 1990s, hitting corporate earnings and prompting consumers to put off purchases in the hope of further price drops.

The current global economic downturn and a slump in commodity costs pushed the world's number two economy back into the deflationary doldrums. Core consumer prices have now fallen year-on-year for the past seven months.