Tokyo, Feb. 28 (Bloomberg) -- Japan's unemployment rate rose to match a record 5.5 percent in January and consumer prices extended a four-and-a-half year slide, as retailers slashed payrolls and offered discounts to maintain sales. Japan's jobless rate rose from a revised 5.3 percent in December, the state statistics bureau said. The government also said Tokyo's core consumer prices, regarded as a benchmark for nationwide prices, fell for a second month in three. It forecast that industrial production will drop 0.4 percent this month, after a 1.5 percent gain in January. ``Japan's economy is still at a standstill,'' Heizo Takenaka, Economic and Fiscal Policy Minister, said after the reports' release. ``Employment conditions continue to be very severe.''
Retailer Tokyu Department Store Co. and metals maker Mitsubishi Materials Corp. continue to cut jobs, damaging confidence among consumers. That threatens to throw the world's second-biggest economy into its fourth recession in a decade, after growth of 0.3 percent last year, economists say. ``The economy started shrinking at the start of the year, and later this year the jobless rate could rise to as much as 6.5 percent,'' said Yasukazu Shimizu, a senior economist at Aozora Bank Ltd. ``It could eventually hit 7.5 percent.'' Unemployment was expected to remain at 5.5 percent in January, according to the median forecast of 36 economists surveyed by Bloomberg News. The jobless rate was last at 5.5 percent in August and October of 2002. ``The lack of job security is the biggest problem now'' in Japan, said Kazuo Mizuishi, spokesman at Teac Corp., a computer parts maker that this week cut its full-year profit forecast to a loss from a profit.
Retailers
The number of unemployed rose to 3.68 million people, on an adjusted basis, from 3.56 million in December. Retailers and wholesalers shed 440,000 jobs from December, according to unadjusted figures provided by the government, and 640,000 from a year earlier. Tokyu Department, Japan's fifth-biggest department store operator, said on Wednesday it plans to cut 500 jobs in June, replacing some employees with part-time workers. The number of part-time workers rose for a 13th straight month, today's government reports showed. The Nikkei 225 Stock Average closed at 8363.04 yen, a 0.04 percent gain from yesterday, when it traded below a 20-year low. The yen was at 117.68 against the dollar, as of 3:08 p.m. in Tokyo, from 117.75 in late New York trading yesterday. Tokyo core prices, which exclude fresh foods, dropped a seasonally adjusted 0.1 percent in February. Core prices nationwide fell 0.8 percent from a year earlier, extending a slide that began in April 1998. Japan's industrial production rose 1.5 percent in January, seasonally adjusted, from December, the Ministry of Economy, Trade and Industry said in a statement, more than the median 1 percent gain expected by 33 economists in a Bloomberg News survey. From a year earlier, production gained 6.8 percent.
Exports
Exports, which accounted for more than half of growth in the fourth quarter, fell in December and January, prompting economists to predict slower expansion of factory output. The government estimates production will fall 0.4 percent in February and rise 0.6 percent in March. Economists said the forecasts may be too upbeat because of the threat of a U.S.-led war to rid Iraq of weapons of mass destruction. North Korea's expulsion of international inspectors at its nuclear plants and its firing this week of a missile are adding to the region's tensions. ``The global economy is slowing and the threat of war in Iraq is taking a toll,'' said Harumi Ichiki, chief economist at Sumitomo-Life Research Institute Inc. ``The situation in North Korea isn't very good timing and it will affect confidence in Japan.'' Some manufacturers are already cutting jobs, shedding 30,000 workers in January from December, and 250,000 from a year earlier, according to unadjusted figures.
Job Cuts
Mitsubishi Materials, Japan's largest non-ferrous metals company, this month said it will reduce its workforce to about 20,000 by March 2005, cutting 2,500 more jobs than initially planned. It cut its pretax profit forecast to 50 billion yen for the year ending March 31, 2005 from 75 billion yen in the coming business year. A separate government report today showed that spending by salaried workers rose a seasonally adjusted 3.6 percent in January from December. From a year earlier it fell 2.0 percent, the fourth straight monthly decline. Inventories held by companies in Japan rose 0.8 percent in January from December, while shipments rose 2.6 percent, the Ministry of Economy, Trade and Industry report said. //www.quote.bloomberg.com