By Yoshiko Matsushita
Tokyo, July 30 (Bloomberg) -- Japan's jobless rate held at 5.4 percent in June, just shy of its record high. Unemployment may climb in coming months as companies from retailer Daimaru Inc. to Kenwood Corp., the maker of car audio equipment, cut staff to boost profit. The world's second-biggest economy added 190,000 jobs in June, not enough to absorb the 210,000 people who entered the workforce, government figures showed. The number of people out of work rose 30,000 to 3.61 million. Economic and Fiscal Policy Minister Heizo Takenaka said Japan's recovery from recession isn't creating more jobs. That's because NEC Corp., Hitachi Ltd. and other big employers aren't hiring after spending billions of yen in the past year to get workers to quit.
``We are in a jobless recovery,'' Takenaka told reporters after cabinet ministers met. ``We're seeing high levels of unemployment even as the economy recovers.'' The jobless rate is just below December's record 5.5 percent. It has held above 5 percent for the past year, and economists said it may reach 6 percent by the end of this year, according to the latest Bloomberg News survey. ``The jobless rate will rise further as companies cut workers and smaller businesses go bust,'' said Yukari Sato, senior economist at J.P. Morgan Securities (Asia) Ltd, who forecast the jobless rate to reach 6 percent next year. Job Cuts Tokyo-based Kenwood this month said it would increase planned job cuts by more than 10 percent and shut a third factory as sales fall. The company will fire 3,000 workers, or more than a third of its workforce. Daimaru Inc., Japan's third-biggest chain of department stores, will pay 200 workers at its supermarket unit, which had a loss of 2.7 billion yen ($22.6 billion), to retire early in an effort to cut costs. People losing their jobs may find it hard to return to work. A separate report showed there were 53 jobs available for every 100 applicants, or almost two people chasing each job, at state- run job placement agencies last month. That's unchanged from May. Today's report showed manufacturers and service providers added jobs last month. Retailers, wholesalers and construction companies eliminated jobs. Part Timers Most of the new jobs are for part-time work. That may hold back an economic recovery because part-time workers aren't paid as much as full-time workers and receive fewer benefits. ``That's how more companies will cope to keep their costs at a minimum,'' said Junichi Makino, a senior economist at Daiwa Institute of Research Ltd. The number of part-time workers rose 500,000 from a year ago to 6.02 million, the sixth straight monthly increase, today's report said. The number of people in full-time work fell by 1.25 million to 45.77 million, the 11th straight decline. Construction companies, among the worst hit by Japan's 12- year economic slump, are struggling to survive as Prime Minister Junichiro Koizumi reduces public works spending. Many construction companies rely on government contracts for roads, dams and museums to stay in business. The industry, which employs about one in 10 Japanese workers, saw 2,999 companies go bankrupt in the first six months of the year, according to credit researcher Tokyo Shoko Research Ltd. The latest victim was Dai Nippon Construction, which filed for bankruptcy protection this month in the second-largest failure of a publicly traded company this year. The builder employed 1,680 people. Cutting Costs Even companies benefiting from increased overseas demand might have to cut costs as the yen's 10 percent gain since the start of the business year makes it harder for them to meet profit forecasts, investors said. Sony Corp., the world's second-biggest maker of consumer electronics, and chipmaker Fujitsu Ltd. last week left their profit forecasts unchanged after saying the stronger yen will reduce sales, meaning they will have to reduce costs. NEC, which shed 16,000 group workers in the fiscal year ended March 31 and then had a 7 billion yen first-quarter operating loss, will offer incentives to the 5,000 workers at its main office aged 45 or older to retire early, a spokesman said. ``Companies had anticipated the yen to be between 125 and 130, and they will have to revise that to 115,'' said Sadaji Shibata, who helps manage $60 billion in assets at Daiwa Asset Management Co. ``They will have to make up for these losses by restructuring and taking cost-cutting measures.'' The yen was trading at 120.08 to the dollar at 12:33 p.m., Tokyo time, its lowest in more than three weeks.