Employment situation in Japan likely to strengthen in 2015: Societe Generale

Quotes from Societe Generale Cross Asset Research:

-We expect the Japan's unemployment rate to rise to 3.5% in January, from 3.4% in December. In December, year-end sales were firm, and the number of employees increased substantially. Although many workers who had previously dropped out of the labour force came back, the increase was absorbed.

-The number of unemployed (i.e. labour force - employed) as a percentage of the labour force was 3.5%, which would point to an unemployment rate of closer to 3.5% than 3.4% in December. Although New Year sales were also firm, the improvement in the unemployment rate was too fast, and we expect it to move back to 3.5% in January. 

-The job-to-applicant ratio reached 1.15 in December, up from 1.12 in November, but such apace of improvement also seems too strong. We expect the job-to-applicant ratio to remain unchanged at 1.15 in January.

-Although the CT hike in April had temporarily prevented the labour market from improving further due to the weak consumption, the situation has recently changed. In 2015, the unemployment rate is likely to fall below the NAIRU of 3.5%, which will underpin today's sentiment that the expansion of aggregate wages is leading Japan to completely exit from deflation.