The Bad News From Japan Continues

Unemployment up, GDP and consumer prices down, there certainly doesn't seem to be any end in sight for Japan's economic woes. Add to this the fact that industrial production contracted in December for the fourth consecutive month, and that the Nikkei touched 20 year lows this week, and it's easy to see there's little cause for optimism. Nevertheless some still seem able to call bad news good, even if the little glimmer of hope, the changing ratio of applicants looking for work to jobs, may be more a reflection of the fact that older people are leaving the job market than anything else. The good news, that is, is that the unemployment problem can be thought by some to be improving because as the population gets older more peolple are retiring, or staying at home to care for the elderly!!

Unemployment in Japan reached a post-war high in December while the deflation that has racked the economy for three years showed no signs of alleviating. Economists are forecasting the economy to contract in the fourth quarter. December unemployment reached 5.5 per cent. Though the ratio of new job offers to applicants rose to 1.04, its highest level since June 2001, the percentage of employed people in the workforce and those actively seeking work declined to 60.6 per cent. In a comedy of errors, Masajuro Shiokawa, the country's finance minister, initially said the jobless figure was "good news". He then retracted the comment after a ministry official whispered in his ear, presumably that the news wasn't so good. Mr Shiokawa said the rise in employment in certain sectors was a positive development.

The core consumer price index for December fell 0.7 per cent, year-on-year, though it held steady from the previous month. For the year, the CPI fell 0.9 per cent, its biggest year-on-year decline. Falling prices have plagued the economy for three consecutive years, making it harder for businesses to repay loans. "Deflationary pressures are still very strong, and with the cut in winter bonuses, final demand will be subdued for some time," said Ryo Hino, economist at JP Morgan in Tokyo. Peter Morgan, economist at HSBC in Tokyo, said that the Japanese CPI underestimated the actual degree of deflation by about 0.7 percentage points. Economists have long questioned the accuracy of Japanese economic data, which led to a re-vamp in the way gross domestic product is calculated. "The main reasons are that CPI does not include prices for short-term sale items, despite the fact that such sales are becoming increasingly common, and it does not adjust adequately for quality changes," said Mr Morgan.
Source: Financial Times
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