Japan’s jobless rate likely to have increased slightly in August

Japan’s jobless rate is expected to have risen in August but likely remained below NAIRU. According to a Societe Generale research report, the unemployment rate is expected to have increased to 3.1 percent in August from July’s 3 percent. Given that the companies are activity hiring from the start of this fiscal year in the face of a solid perception of a labor shortage, employment has risen steadily.

The Japanese labor market is steadily absorbing the rise in labor force participation by older age groups and women. Unemployment has dropped considerably from 3.3 percent in February, whereas the labor force has risen by 0.9 percent. Also, the number of employed workers has increased 1.2 percent. However, while companies continued to hire in August, weather conditions are expected to have temporarily stalled the rebound in the labor market.

The job-to-applicant ratio is expected to have stayed at 1.37, thereby keeping its highest level since August 1991. The ratio has risen considerably from 1.28 in February, as the number of job openings has risen by 2.5 percent while the number of job seekers has dropped by 4.4 percent.

There are claims that Japan’s jobless rate would not decline further as the structural lower bound is 3 percent. Nut as there is no scarcity of goods and services because of labor shortages, the actual structural lower bound of the jobless rate is possibly much below 3 percent.

“In 2017, the unemployment rate will likely fall consistently below 3.0 percent, and increases in aggregate wages will likely reaccelerate the move toward a complete exit from deflation”, added Societe Generale.