Jobless rate in Japan likely remained unchanged in June

Japan’s jobless rate is likely to have remained unchanged in June. Societe Generale, in a research report, stated that June’s jobless rate is expected to have stayed at 3.2 percent, the level that has been maintained for three straight months. Hiring activities have been increased by corporates as they are experiencing a shortage of labor, and employment is increasing solidly.

Since the beginning of the fiscal year in April, the job-to-applicant ratio has been steadily rising and the ratio is expected to be 1.36 in June. Corporate sentiment towards hiring has not diminished and the jobless rate continues to be lower than 3.5 percent, which is where wage rises are to begin and a scenario where rises in wage add to the rise in price trends of around 1 percent is still maintained.

But for inflation to reach the target level of 2 percent, which is set by the Bank of Japan and the government, the jobless rate should drop below 3 percent and move towards 2.5 percent, stated Societe Generale.

“For a stable 1 percent increase in the price level, the NAIRU unemployment level is likely around 3.5 percent, and for the 2 percent price level, the unemployment level is likely to need to be around 2.5 percent,” added Societe Generale.

It will take additional time for the jobless rate to reach the target level. Also, economic conditions should rebound. Moreover, there are certain threats arising in the future. Uncertainty in the global markets and economy since the start of 2016 has deteriorated corporate confidence and there are certain signs of deceleration in corporate activity.

If corporates do not face a scenario where there is sufficient demand and can profit enough to counter the hiring activity, continued rebound of the labor market is unlikely, and also companies might move to restructure and cut their workforce, according to Societe Generale.

If the Japanese central bank and the government set up strong policies to underpin the Japanese economy, corporates would recognize and note that Abenomics have restarted, and jobless rate would then decline below 3 percent sometime next year as wages rise considerably and the move toward exiting deflation quickens, stated Societe Generale.