Japan’s Unemployment Rate Unexpectedly Falls to 4.9% (Update2)

March 2 (Bloomberg) -- Japan’s unemployment rate unexpectedly fell to a 10-month low in January as the economy added the most jobs in more than 30 years.

The jobless rate dropped to 4.9 percent from a revised 5.2 percent in December, the statistics bureau said today in Tokyo. The median forecast of 25 economists surveyed by Bloomberg News was for the rate to be unchanged from a preliminary 5.1 percent.

A separate report showed that households increased spending for a sixth straight month, adding to signs that a rebound in exports is starting to benefit consumers in the world’s second- largest economy. Still, further improvements in the job market may be limited because companies are still burdened by excess labor, according to economist Masamichi Adachi.

“Today’s report was encouraging, especially looking at the payroll numbers,” said Adachi, a senior economist at JPMorgan Chase & Co. in Tokyo. “But I don’t think we’ll continue to see these kinds of improvements in the months ahead. Companies aren’t at a point where they need more workers.”

The yen traded at 89.28 per dollar at 11:45 a.m. in Tokyo from 89.13 before the report was published.

Electronics retailer Bic Camera Inc. will hire more graduates than initially planned for the year starting April 1, according to spokesman Masato Takata, who didn’t provide an exact figure. At the same time, textile maker Nisshinbo Holdings Inc. and retailer Best Denki Co. are among companies that have announced job cuts in the past month.

Spending Climbs

The unemployment figures were revised to reflect a change in seasonal adjustments, the government said. Household spending climbed 1.7 percent in January, the bureau said, led by increased outlays for food.

The economy added 540,000 jobs in January, the most since October 1973, today’s report showed. Service industries including hotels and restaurants as well as medical and welfare firms hired workers, according to year-on-year breakdowns. The government doesn’t provide seasonally adjusted job data by industry.

Japanese workers are better placed to find work compared with their American and European counterparts. The unemployment rate in Europe was 9.9 percent in January, the highest in more than 11 years, and in the U.S. was 9.7 percent.

In other signs Japan’s labor market is past its worst, the job-to-applicant ratio rose to 0.46, meaning there are 46 positions for every 100 candidates, the Labor Ministry said today. Historical figures revised to reflect seasonal adjustments showed it was the first increase since September.

Expansion

Separate reports released in the past week show the nation’s expansion may be extending into the first quarter. Exports grew at the fastest pace in more than 30 years in January while industrial production advanced the most since May.

Overseas shipments, the main driver of Japan’s annualized 4.6 percent growth in the fourth quarter, have been spurred by increase demand in China, the nation’s largest customer.

The Labor Ministry said there were 85 newly advertised jobs in January for every 100 people who started looking for a job that month, marking a second monthly increase. Analysts regard the gauge as a leading indicator of employment.

Even so, deflation remains a risk for the outlook. Slumping prices are squeezing profit margins, requiring firms to slash costs. Consumer prices excluding food and energy dropped 1.2 percent in January, matching December’s record decline, the government said last week.

Underwrite Debt

Finance Minister Naoto Kan renewed calls on the Bank of Japan to help arrest deflation yesterday, saying he hopes prices will rise this year, while Financial Services Minister Shizuka Kamei said the bank could underwrite government debt to fund fiscal stimulus needed to support the economy.

Kan said today at a press conference that the unemployment data show the labor market is “improving somewhat.” He also repeated a request for the central bank to take “appropriate action” to combat deflation.

Separately, Trade Minister Masayuki Naoshima told reporters today global recalls for Toyota Motor Corp. cars may weigh on Japan’s economy, Kyodo News reported. The automaker has recalled 8 million vehicles because of accelerator and brake problems.

Nisshinbo Holdings said last month it will eliminate 150 positions at its Nisshinbo Industries unit as it aims to reduce its domestic facilities. Business deteriorated as a result of falling prices, according to the maker of textiles and chemical products.

Cut Jobs

Best Denki, a consumer electronics retailer, said yesterday it will shut 63 stores by February 2012 and is in talks with its labor union to cut jobs. The company may pare about 1,000 jobs, or 20 percent of its workforce, through an early retirement program and a reduction in new hiring, Kyodo News reported yesterday, citing unidentified sources.

Others are trimming their hiring plans. Mizuho Financial Group Inc., Japan’s third-largest bank by market value, has announced that it will hire 34 percent fewer graduates for the fiscal year starting April 2011.

“I bet there are very few people who think the labor market has made big advances,” said JPMorgan’s Adachi. “ It was very, very bad for a while, and since then it’s gotten a little better.”

To contact the reporter on this story: Aki Ito in Tokyo at aito16@bloomberg.net

To contact the editor responsible for this story: Chris Anstey at canstey@bloomberg.net