/www.bloomberg.com/ By Ann Saphir and Kanako Chiba
Tokyo, Oct. 29 (Bloomberg) -- Japan's unemployment rate held near a record high for a fifth month in September, and 30,000 jobs disappeared as factories cut production for the first time in three months because of falling exports.
The unemployment rate was unchanged at 5.4 percent, just below the record 5.5 percent of last December, the government reported. The number of unemployed rose to 3.6 million. Another report showed industrial production dropped 0.3 percent from August, led by a decline in cars and integrated circuits.
Manufacturers plan more cuts next month as the U.S. economy slows. The ranks of the unemployed will probably swell as Prime Minister Junichiro Koizumi presses Mizuho Holdings Inc. and other lenders to write off an estimated 52.4 trillion yen ($420 billion) in bad loans, pushing companies into bankruptcy.
``Japan's economic fundamentals are worsening,'' said Junichi Makino, a senior economist at Daiwa Institute of Research. ``Production probably won't recover until March next year, and with the government's plan to speed up the bad-loan disposals, it's likely the jobless rate will go up from now.''
Honda Motor Co. fell 12 percent as of 12:55 p.m. in Tokyo after Japan's No. 2 carmaker cut its profit forecast because of a stronger yen and higher promotional costs in the U.S. The Nikkei 225 stock average fell 0.5 percent to 8717.09.
Construction Jobs
Rising unemployment is more bad news for an economy struggling to emerge from its third recession in a decade. Consumer spending, which makes up more than half the economy, is faltering as Japanese are thrown out of work.
The jobless report showed construction companies, which employ one in 10 Japanese, shed 120,000 jobs in September.
Job prospects are fading as exports fall, threatening to cut short Japan's economic recovery. Exports, which accounted for half of the 0.6 percent economic growth in the second quarter, fell for a fourth month in September. Manufacturers cut workers in the three months ended September even as production rose to its highest level since the second quarter of 2001.
Japan's labor pool shrank in September for the first time since May as workers discouraged by reduced job prospects gave up looking for work.
A government push to clean up bad loans will eliminate more jobs as lenders cut off weak companies. Financial Services Minister Heizo Takenaka said he will try to release his proposal for disposing of bad loans at lenders tomorrow.
Lending Slide
Japan's seven biggest banks had combined losses of 4.07 trillion yen in the year to March as companies such as Mycal Corp. and Aoki Corp. defaulted on debt. Banks made loans to large retailers and construction companies during the asset inflation in land and stock prices of the late 1980s and early 1990s.
Bad debts have contributed to a six-year slide in lending, starving companies of the credit they need to invest and hire more workers. Writing off bad loans will free banks to lend again, economists say.
Falling overseas sales are prompting companies such as Fujitsu Ltd., the country's largest business-computer maker, to cut costs. Fujitsu said this month it would slash 1,100 jobs, or 0.6 percent of its workforce, at two domestic plants.
Today's report showed industrial production rose 4.9 percent in September from a year ago. Production will rise 1.2 percent this month in preparation for a Christmas and end-of-year sales rush before falling 1.4 percent next month, the government said, signaling companies may expect exports to decline further.
Consumer Confidence
Orders for communications equipment and machinery slumped last month in the U.S., Japan's biggest overseas market, and consumer confidence fell to a nine-year low. U.S. economic growth will slow to a 2.2 percent annual rate this quarter from an expected 3.6 percent pace in the third quarter as consumer spending cools, according to a consensus estimate of economists surveyed by Blue Chip Economic Indicators.
Toshiba Corp., the world's No. 2 chipmaker, cut its full-year sales forecast to 5.7 trillion yen from 5.9 trillion yen as demand for factory equipment wanes and consumers buy fewer home appliances.
Fanuc Ltd., the world's biggest maker of industrial robots, expects sales to fall 4.4 percent this fiscal year to 207 billion yen because of lower demand from General Motors Corp. and other car companies, which number among its biggest customers.
Car companies are also getting squeezed. U.S. October auto sales may fall 27 percent from a year-earlier as no-interest loans lose their appeal, according to New Jersey-based automotive research company Luckey Consulting Group Inc.
Factory Shipments
That didn't stop Honda Motor from raising its North American target by 2.6 percent to 1.99 million units, gains which may come by taking market share from home-grown rivals.
Still, the shrinking domestic market is hurting even Honda. Honda cut its Japan unit sales forecast for the year to 900,000 units from an earlier prediction of 920,000 units.
Factory shipments fell 2.3 percent last month, today's report showed, while inventories rose 0.6 percent. The inventory ratio, which rises when stockpiles build up faster than shipments increase, rose 3.4 percent.
In one bright spot, there were 55 jobs per applicant in September, one more than in August, a separate government report showed.
Another government report showed spending by households headed by a salaried worker rose 5.6 percent in September from a month earlier and increased 4.1 percent from the same month a year ago.
The yield on the No. 243 bond was unchanged at 1.04 percent as of 12:55 p.m. Tokyo time.