Japan's employment situation to strengthen in 2015

The unemployment rate is likely to remain unchanged at 3.4% in April. In March, the number of job seekers that dropped out of the labour force increased, and this led to a technical improvement in the unemployment rate (it was 3.5% in February). Both the manufacturing and non-manufacturing sectors are feeling shortage in labour, and are now stepping up hiring. 

After April, the start of the new fiscal year, companies are expected to have increased hiring, and these new positions are likely to be filled easily as many workers who had previously dropped out of the labour force are likely to return to work. In 2015, Societe Generale expects the unemployment rate to fall below 3.5%, which corresponds to the NAIRU level that will underpin the sentiment at the present time that the expansion of aggregate wages is allowing Japan to make a full exit from deflation. However, if this is not realised, the BoJ's 2% price stability target will be difficult to achieve. It is necessary for the unemployment rate to fall below 3% for this to be realised, but this level still seems to be too far away to actually materialise. The job-to-applicant ratio is likely to reach 1.16 in April, up from 1.15 in March.