31 January 2003, 09:48  Japan's December Jobless Rate Rises to Record 5.5% (Update7)

Tokyo, Jan. 31 (Bloomberg) -- Japan's unemployment rate rose in December to match a record and household spending fell to its lowest in more than two decades, deepening the 12-year slump in the world's No. 2 economy. The jobless rate rose to 5.5 percent from 5.3 percent in November, the government's statistics bureau said. Spending by salaried workers fell a seasonally adjusted 6.1 percent in December from November to the lowest since January 1982, a separate report said. Japanese companies such as Taihei Kogyo Co. and Mitsukoshi Ltd. are slashing jobs as a 4 1/2-year decline in prices cuts profits and consumers curb spending. The jobless rate may rise in coming months as Prime Minister Junichiro Koizumi's plan to write off about 52.4 trillion yen ($440 billion) of bad loans at banks drives companies into insolvency.
``Things may get worse if the government pushes through reforms,'' said Koji Kurotake, head of accounting at construction company Taihei Kogyo, which on Tuesday said it would eliminate 1,500 jobs over three years. ``We should have restructured two years ago, and now we're going to pay for the delay.'' The yen was little changed at 118.97 to the dollar at 1:25 p.m. in Tokyo from 118.96 late yesterday in New York, after falling as low as 119.27. The No. 245 bond, which carries a 0.9 percent coupon and matures in 2012, fell 0.186 to 101.053. Its yield rose 2 basis points to 0.785 percent, after yesterday reaching a record of 0.75 percent. A basis point is 0.01 percentage point.
Falling Prices
Bond yields have been falling on expectations Koizumi and the central bank will fail to halt sliding prices. Nationwide core consumer prices, which exclude fresh food, fell 0.7 percent in December from a year earlier, another report today showed, extending a slide that began in April 1998. Nationwide prices for all of last year fell 0.9 percent. December's 5.5 percent unemployment rate was higher than the 5.4 percent median forecast of 33 economists in a Bloomberg News survey. The economy added 10,000 jobs in December, while 80,000 people joined the workforce. The average unemployment rate for all of last year rose to a record 5.4 percent. ``The labor market situation is bad, and it's set to worsen in the months ahead,'' said Taro Saito, an economist at NLI Research Institute. ``I'm expecting the jobless rate to reach 6 percent'' by the end of the next fiscal year on March 31, 2004. Job cuts were led by wholesalers, retailers and restaurants, which slashed 50,000 workers in December, today's report showed. Department stores such as Takashimaya Co., Japan's biggest, struggled in December because winter bonuses fell 3.1 percent from last year and early year-end sales in November curbed demand.
`Poor Sales'
``Retailers had poor sales in December and may have laid off part-time workers as a result,'' said Ayako Mitsui, an economist at UBS Warburg Japan Ltd. Mitsukoshi, Japan's second-largest department store operator, yesterday said it would cut 460 jobs, or 3.7 percent of its workforce, by February 2004. Mitsukoshi in October cut its full-year profit forecast 8.3 percent for the fiscal year ending Feb. 28, after first-half profit fell 16 percent on lower food sales. Shares of Tokyo-based Mitsukoshi have fallen 15 percent in the last year. Construction company Taihei Kogyo doubled its group net loss forecast for the year ending March 31 to 4 billion yen. It announced a cost-cutting plan that would eliminate 22 percent of its workforce by March 2006. //www.quote.bloomberg.com

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