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Friday, July 31, 1998 Published at 05:46 GMT 06:46 UK

World: Asia-Pacific

Unemployment blow for Japan

The business world is watching developments in Japan with interest

As the new Japanese Prime Minister, Keizo Obuchi, addresses the challenge of bringing the country out of economic recession, figures released by the government show that the number of people out of work has reached a record high level.

Juliet Hindell: Jobless figures are a reminder of the huge task ahead
More than 2,800,000 people were registered unemployed in June - 4.3% of the working population, and an increase of nearly 500,000 on the same period last year.

The worst affected group was men between the ages of 35 and 44 but job losses were bad in all sectors.

The new Finance Minister, Kiichi Miyazawa, said that the government should do anything it could to prevent unemployment increasing further.

But economists predict that worse is yet to come, many believing that 5% of Japanese workers will be out of a job by the end of the year.

Our correspondent says the figures, while low by world standards, represent a sharp change in Japanese society, where many assumed they would have a job for life.

Now, the fear of unemployment is preventing people spending money, precisely when the economy needs a consumer boom.

Obuchi promises action

Economist Matthew Poggi: "Markets have reacted quite poorly"
Mr Obuchi has promised his new cabinet, which he announced on Thursday, will be able to resolve Japan's pressing economic problems in a decisive and speedy manner.

Mr Miyazawa has said market forces will be given a greater role than before in tackling the country's worst economic recession for 50 years.

[ image: Mr Miyazawa wants to let market forces play a bigger role]
Mr Miyazawa wants to let market forces play a bigger role
The remark by the one-time prime minister, appointed as finance minister by Mr Obuchi, was an early indication of policy direction from the new cabinet.

The first cabinet meeting was held in the middle of the night and was said to be largely ceremonial.

But the new cabinet did take steps to freeze legislation that limits government spending.

Televised address

Mr Obuchi is due to make a televised address on Friday, at 0800 BST.

The address will be scrutinised by economists around the world who are waiting to see what impact the change of government will have on the struggling Japanese economy.

[ image: Prime Minister Obuchi (centre) with his predecessor, Ryutaro Hashimoto (right)]
Prime Minister Obuchi (centre) with his predecessor, Ryutaro Hashimoto (right)
The all-new cabinet includes more people with experience of private industry.

It takes over from the government of Ryutaro Hashimoto, who resigned following the Liberal Democratic Party's poor showing in parliamentary elections.

The new foreign minister is Masahiko Komura, who was previously Mr Obuchi's deputy during his own days at the foreign ministry.

The new government faces the task of trying to pull Japan out of its worst recession for 50 years.

Since Mr Hashimoto's resignation, policy-making has been put on hold at a time when the economy has been demanding urgent attention.

Jiro Nemoto, chairman of the Federation of Employers Associations, urged the new Prime Minister to be aware of a "battle against time" to pull Japan out of recession.

"It is no longer allowed to put off solving problems," he said.

The head of the Bank of Japan says that measures taken so far have failed to have any effect on Japan's worsening economic crisis.

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