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Tuesday, 30 October, 2001, 07:19 GMT
Shock rise in Japanese jobless
Japanese Prime Minister
Prime Minister Junichiro Koizumi is facing a big challenge
Unemployment in Japan rose to 5.3% in September, another record high.

And there is little short term prospect of a recovery, according to the Minister for Economic & Fiscal Policy, who predicted that Japan's economy would stay in recession for the next two years.

Adding to the gloom, some of Japan's biggest corporate names plunged into the red for the half year ending September.

Japan's biggest consumer electronics firm Matsushita Electric Industrial crashed to a $579m loss, Mitsubishi Electric reported a 97.8% fall in profits, while chip maker Hitachi also fell into the red and lowered its full year forecast.

Jobless forecast

There was already plenty of gloom in Japan after the last unemployment record of 5% was set in July, a level stubbornly held in August.

And it is unlikely to improve soon.

"Employment conditions are becoming more severe," an economy ministry official said.

"Looking at leading indicators such as overtime [pay data], it doesn't seem like they will improve any time soon."

On Monday, the Bank of Japan warned that the economic downturn was likely to get worse.

Economic difficulties

The rise in the number of unemployed is the latest indication that Japan's economy is in dire straits.

Things were bad in Japan before the 11 September attacks on the US. They have deteriorated since.

Japan's reliance on exports to other rich countries, especially to the US, has received a serious blow from the downturn in global economic growth.

Gloomy outlook

"I think the forecast by the Cabinet Office will not be much different from the [Bank of Japan's]," State Minister for Economic & Fiscal Policy Heizo Takenaka said, adding that he aimed to release the Cabinet Office revised prediction later this week.

"I expect the US economic recovery will be delayed to the second half of next year, from the second half of this year, after the 11 September attacks," he said.

"If this happens, Japan's GDP (gross domestic product) may be negative next fiscal year."

The remarks came a day after the central bank warned the economy would shrink by up to 1.2% this financial year, contrasting sharply with an earlier prediction of minimal 0.3% growth.

Recession

The central bank on Monday warned that no upturn was expected for a couple of years.

The country's former engines of growth, the leading-edge technology groups, have all slashed thousands of jobs in recent weeks amid plummeting profits.

Many small and medium-sized firms have also been hit, although the numbers of closures and lay-offs have been less spectacular except when seen as a whole.

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 ON THIS STORY
The BBC's Charles Scanlon
"The rapid rise in unemployment for September was even worse than expected"
See also:

29 Oct 01 | Business
Bank of Japan warns of recession
16 Oct 01 | Business
Japan sets extra budget
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