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Tuesday, June 29, 1999 Published at 09:58 GMT 10:58 UK

Business: The Economy

Japan's jobless rate falls

A temporary dip - or sign of a turnaround?

Japan's jobless rate dropped for the first time in 10 months in May, according to the latest government figures.

But analysts warned this was still not a sign of the long-awaited recovery in the world's second largest economy.

Japan's unemployment rate fell to 4.6%, down 0.2% from the previous month.

The number of unemployed was down to 3.34m in May compared with a record high 3.42m in April.

Experts said many of the new jobs were part-time hirings and the number of unemployed men was at a record high.

Part-time work

Job openings fell to a record low of 46 per 100 job seekers, the labour ministry said.

"Although the jobless figure slightly improved this month, it was due to more hiring of part-time workers after companies got rid of full-time employees," said Koichi Ono, economist at Daiwa Institute of Research.

"Unless the government and companies themselves come up with measures to create venture businesses to absorb those who have lost their jobs, the May decline could be just a temporary phenomenon," he said.

Politicians cautious

Investors had begun to believe a recovery was underway in Japan, after figures released earlier this month showed the economy grew at a strong 7.9% annualised rate in the three months to March.

However, the management and coordination agency did have some positive news, saying spending by salary-earning households had risen 1.5% in May from last year, the first rise in four months, thanks to higher spending on houses and cars.

Tokyo's Nikkei stock index also climbed 172.21 points, or 1%, to end at 17,782.79 on Tuesday, its highest level since October 1997.

But industrial production, a better indicator of current economic health, fell 0.7% in May compared with the previous month, far worse than economists expected.

Even Japan's leaders stopped short of taking the improved unemployment rate as a positive sign.

"I don't think it was a particular sign of improvement," Finance Minister Kiichi Miyazawa told a news conference.

Labour Minister Akira Amari told a separate news conference: "We should not alternate between hope and despair. We need to be ready to consider that we may see a severe situation in June and July."

In Cologne last week, Prime Minister Keizo Obuchi promised his Group of Eight (G8) partners he would make every effort to ensure growth in the Japanese economy this year.

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