Japan jobless rate hits new high

Japan's army of unemployed is growing

The unemployment rate in Japan has, for the third successive month, hit a record high, and there are few signs that it will fall again in the near future.

The unemployment rate hit 5.4% in October, up from 5.3% in September and 5% in July.

"The unemployment situation remains serious," said the director of the government's Labor Force Statistics Office, Masato Chino.

The October jobless rate was the highest since records began in the 1950s.

Crucial reforms

The Japanese economy, the world's second largest, has for much of the last decade struggled to emerge from a slump.

Tough economic reforms aimed at curbing the country's massive debts and to shore up its seriously troubled banking sector could push unemployment higher.

"If new industries are to grow, we first need economic reform," said Susumu Takahashi, chief economist at the Tokyo think-tank Japan Research Institute.

"That means more pain, and unemployment will rise."

Two years of recession

But the number of jobless would probably have risen anyway.

Failure to implement economic reforms is likely to make the country sink deeper into what both the Bank of Japan and the government acknowledge is likely to be yet another recession.

The government's own predictions point to a 0.9% fall-back in economic growth for the fiscal year that ends in March 2002.

And the country's central bank has few hopes of a return to economic growth until 2003.

In other words, Japan's recession could run for two years.

Mr Takahashi agrees.

He believes up to 1.5 million people could lose their jobs between now and 2006, and the unemployment rate could rise to 7%.

Deflation

Japan is suffering from deflation, that is falling prices.

In October, prices fell 0.8% from last year, the Ministry of Public Management, Home Affairs, Posts and Telecommunications said.

But spending by Japanese salary-earning household rose in October for the first time in seven months.

Spending rose 1.6% in October, bouncing back from a 1.3% fall in September, indicating a possible recovery in consumer sentiment.