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Tuesday, March 30, 1999 Published at 09:00 GMT 10:00 UK

Business: The Economy

Japan's jobless rate hits record high

More Japanese workers are pacing the streets for work

Japan's jobless rate has jumped to a record 4.6% in February, sapping hopes the country will soon emerge from its darkest recession since World War II.

The unemployment rate rose sharply from the previous month's 4.4% - a record for three straight months - and swelled the ranks of jobless to a historic three million people.

[ image: The Government is desperate for Japanese consumers to spend more]
The Government is desperate for Japanese consumers to spend more
"I have to admit that the situation in February was harsher than expected," said Taiichi Sakaiya, chief of the Economic Planning Agency.

"The strength of the recovery is very weak."

The sour figures come as Japan as battles against its deepest economic slowdown in 50 years, and is a bitter blow for a country where many companies once prided themselves on offering the promise of life-time employment.

The government has pumped trillions of yen into the economy in an all-out campaign to persuade consumers to spend.

But amid the worsening jobs situation, spending by Japanese wage earners' households fell 4.1% in real terms in February from a year earlier to an average of 303,264 yen ($2,525).

They spent just 67.8% of their disposable income, down from 70.9% in January.

Spending plans

The grim statistics were already putting pressure on the government to do more to bolster growth.

Finance Minister Kiichi Miyazawa said he was ready to invest more: "I'm worried about the unemployment situation."

"Although we've taken steps necessary to ease the jobless problem, we're ready to increase budget spending for jobs if necessary."

Slimming down to survive

A major factor behind spreading joblessness is corporate restructuring.

[ image: Japan is mired in its worst recession since Wolrd War II]
Japan is mired in its worst recession since Wolrd War II
Many top-flight Japanese companies fighting to regain competitiveness are trimming staff, selling off subsidiaries and closing offices.

The total number of people without jobs rose by 670,000 from a year earlier to 3.13m - the most since the Management and Co-ordination Agency began recording the data in 1953.

Over the year the total number of people in employment shrank by 770,000 to 63.34m, the agency said.

It was the largest-ever decrease in the number of job holders and marked the 13th consecutive month of declines.

'Worse to come?'

The statistics were not much of a surprise to some analysts.

"It's certainly consistent with the weakness we're seeing in the Japanese economy, particularly in private demand," said Cameron Umetsu, senior strategist for Warburg Dillon Read Japan Ltd.

"It promises to get even worse as underlying conditions deteriorate."

The new jobless rate cements the reversal of fortunes between Japan and its top economic competitor, the United States.

In the 1980s, it seemed Japan was on track to supplant the United States as the world's supreme economic power.

Now Japan is suffering from an unemployment rate that is pulling further ahead of the US rate of 4.3%.

The numbers of Tuesday were the latest in a long string of dour economic announcements in Japan.

The government said earlier this month that gross domestic product shrank 0.8% in the last three months of 1998, putting the economy on track to shrink 3.2% in the 1998-99 fiscal year if the pace continues.

Most analysts expect the economy to shrink in the next fiscal year, which begins 1 April.

Japan is fighting the recession with its biggest spending spree in history.

The government has earmarked a mammoth 81.9 trillion yen in the next budget, for public works spending, tax cuts and other stimulus measures.

Officials are also spending 7.5 trillion yen ($62.5bn) to bail out the country's troubled banks, which are saddled with loads of bad debt from the collapse of the speculative bubble in the early 1990s.

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