Japan in deeper recession
Unemployment jumped to 4.4 percent in December from 3.9 in November as sliding corporate profits prompted a wave of layoffs. The last time the jobless rate was so high was in January 2006.
The Straits Times
JAPAN'S industrial output fell at the fastest pace on record in December while consumer spending slumped and unemployment hit a near three-year high, official figures showed on Friday.
The slew of gloomy reports added to fears that Asia's biggest economy is slipping deeper into recession as the global economic crisis crushes demand for Japanese goods, prompting companies to slash jobs and investment.
Industrial production plunged 9.6 per cent in December from the previous month as firms idled factory lines in response to slumping exports, the government said.
For the three months to December, industrial output fell a massive 11.9 per cent, adding to fears that the overall economy will show a sharp contraction in the quarter.
Manufacturers painted a bleak picture of the outlook, forecasting output would tumble 9.1 per cent in January and a further 4.7 per cent in February.
Unemployment jumped to 4.4 percent in December from 3.9 in November as sliding corporate profits prompted a wave of layoffs. The last time the jobless rate was so high was in January 2006.
There were 2.7 million people without jobs in December, an increase of 390,000, or 16.9 per cent, from a year earlier, the government said.
Household spending tumbled 4.6 per cent in December from a year earlier as consumers tightened their belts to cope with the recession.
Inflation slowed sharply in December as energy prices cooled and domestic demand weakened due to the country's first recession in seven years.
Core consumer prices rose 0.2 per cent in December from a year earlier, compared with a 1.0 percent increase in November.
Core inflation peaked at 2.4 per cent in July and August last year, but there are now concerns that deflation could return.
Japan is still recovering from a long deflationary spiral seen after its economic bubble burst in the early 1990s.
The current global economic crisis has battered demand for Japanese cars, electronics and other goods, pushing exports down a record 35 per cent in December, according to earlier figures.
Analysts have warned that Japan's economy, the second largest in the world, is likely to have contracted 10 per cent or more on an annualised basis in the fourth quarter of 2008 – the worst performance in three decades.
Investors took fright at the raft of grim data, pushing the Nikkei stock index down 3.0 per cent in early trade.
'Frightening'
'If the production cuts ended with the carmakers that would be one thing, but the carmakers drag down the steelmakers and the suppliers along with them,' RBS's Nishioka said. 'The numbers are frightening.'
Last month's increase in the jobless rate was the sharpest since 1967, the statistics bureau said, as manufacturers fired mostly temporary staff. Some 400,000 non-regular workers will be out of jobs by the end of March, the Japan Manufacturing
Outsourcing Association reported this week, which was about five times more than a December estimate by the Labor Ministry.
'This deep recession could compel companies to cut full- time workers,' said Mr Noriaki Matsuoka, an economist at Daiwa Asset Management Co in Tokyo. 'The jobless rate could rise to around 5 per cent, giving us more reasons not to expect consumer spending to support the economy.'
Parliamentary gridlock has stymied the ruling Liberal Democratic Party's efforts to pass a 10 trillion yen (S$167.7 billion) stimulus package that seeks to encourage consumer spending. The Bank of Japan, which last month lowered interest rates to 0.1 per cent, has little room to counter the downturn, reported Bloomberg.
