Friday, March 28, 2008

Inflation and Jobless Figures Rise In Japan

by Rohan Parker

The unemployment rate in Japan has risen for the first time in five months, along with consumer prices hiking up faster than has been seen for nearly a decade, which all serves to fuel fears that the Japanese economy may be rapidly declining into a recession.

According to the bureau of statistics in Tokyo, the core prices in Japan, which do not include fruit and vegetables or fish, has risen by 1% in February from the same time last year. Job vacancies are at a two year low, whilst the unemployment rate rose to its highest since October last year, 3.9%

Analysts are forecasting an extreme reduction in economy growth, which, when viewed in conjunction with the speed up of inflation and the rise of unemployment, the task before the Bank of Japan to reinvigorate the economy may become a very difficult endeavor.

With oil and commodity prices floating so high, inflation is being driven onwards and upwards, which could spell out an end to the countries lengthy postwar expansion, according to economists from Sumitomo Mitsui Asset Management Co., and Goldman Sachs Group Inc.

Hiroaki Muto, who is a senior analysts from Sumitomo Mitsui Asset in Tokyo, has said that the financial figures coming out of Japan’s markets suggest the country is already within the grip of a moderate recession, and that the next course of action is for the policy board to enact a rate cut.

The bureau of statistics announced as a part of their report that household spending seems to have dramatically fallen back. Consumption has been forecasted to rise to 2.4% whilst the jobless rate stays at 3.8%. However the ration between jobs available to applicant’s looking has fallen to 0.97%, the lowest such figure since September 2005.

Chief economist for Japan at Morgan Stanley in Tokyo, Takehiro Sato, stated that regardless of any desire to do so, businesses simply cannot afford to hire more people or raise wages, and that the profit margins are quickly slimming as oil maintains such a high price, and the yen moves upwards whilst the U.S. dollar declines.

Economists expect reports next week which will either confirm or deny the reduction of the economy. A governmental report due on the 31st is expected to show a decline in industrial production for a second consecutive month. A national survey which monitors confidence in business,the Tankan survey from the Bank of Japan, is due on April 1st and is likely to show big business confidence has fallen to a four year low.

HSBC Securities Japan Ltd.’s chief economist, Seiji Shiraishi, has stated that the current state of the job market, along with the reduction in consumer sales, are indicative of Japan already being in a recession and that the Bank of Japan is going to be forced to cut interest rates between April and June.

 

 

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