Jobless rate in Japan likely dropped in January on improved tourism-related employment

Japan's jobless rate is expected to decline in January to 3.2% from 3.3% in December. Winter-related consumption and tourism have been hit due to a warmer-than-usual winter in December. Since the start of January 2016, the weather became much colder, improving the situation. Foreign tourists to Japan increased by 52% y/y, while tourists from China are increasing to a huge extent in spite of the CNY's depreciation. Hence, tourism-related employment is expected to have continued to expand.

For some time, the employment rate has been lower than 3.5%, while the labor supply and demand have tightened. Wages, particularly for part-time workers, are increasing due to considerable improvement in working conditions. Therefore, several workers are looking for better working conditions, which are likely resulting in volatility in the jobless rate, which has fluctuated between 3.1% and 3.4% since April 2015.

The number of new positions increased between March and December 2015 by 15% y/y, whereas the number of workers looking for jobs grew just 3.5% y/y. Corporates' intentions to increase hiring are bolstering. The job-to-applicant ratio is expected to have increased up t0 1.28 in January from 1.27 in December.

The jobless rate is required to drop much below 3% in a bid to reach the BoJ's inflation target of 2%. Also, the tight labor market requires triggering stronger wage increases. Furthermore, it is vital that inflation accelerates due to wage inflation and expansion of consumption.