Tokyo, April 25 (Bloomberg) -- Japan's unemployment rate rose to 5.4 percent in March, higher than expected, as companies such as Fujitsu Business Systems Ltd. cut jobs in a slowing economy. The rate had been expected to rise to 5.3 percent from 5.2 percent, according to the median forecast of 30 economists surveyed by Bloomberg News. The number of people looking for work grew by 420,000, while 300,000 found jobs, the report said. The number of unemployed people rose to 3.59 million. A rising jobless rate threatens to curb consumer spending, which accounts for more than half of the world's second-biggest economy. Tokyo core consumer prices fell in April, another report today showed, suggesting that five years of deflation that have eroded company earnings aren't coming to an end.
``We're still eliminating jobs through early retirement,'' said Masaki Baba, a spokesman for Fujitsu Business Systems, a software services company that cut 110 jobs, or about 3 percent of its work force, in the business year ended March 31. Japanese five-year notes rose to a record. The No. 25 note, which carries a 0.3 percent coupon and matures in 2008, rose 0.024 to 100.362 as of 11:05 a.m. in Tokyo. Its yield fell half a basis point to 0.225 percent. A basis point is 0.01 percentage point. Stocks fell, led by exporters such as Toyota Motor Corp., after a U.S. government jobless claims report stoked concern that spending in Japan's biggest export market may slow. The number of Americans filing new claims for state unemployment benefits unexpectedly rose last week to 455,000, the highest in more than a year. The unemployment rate in the U.S. is 5.8 percent. The Nikkei 225 Stock Average fell 2.2 percent at 11:30 a.m. in Tokyo to 7685.28.
Household Spending
A separate government report showed that spending by Japanese households headed by a salaried worker rose a seasonally adjusted 0.6 percent in March from February. From a year earlier, spending fell 2.3 percent, the sixth straight drop. The spending slump is hurting retailers such as Mitsukoshi Ltd., Japan's second-largest department store operator. Mitsukoshi yesterday said sales fell 2.2 percent in the business year ended Feb. 28, pushing its profit down 16 percent to 6.3 billion yen ($52.5 million). Sales at Japan's large home electronic appliance stores fell 4.3 percent in March from a year earlier to 217.3 billion yen, the Nippon Electric Big-Stores Association said today. Core consumer prices in Tokyo fell 0.1 percent in April, seasonally adjusted from March, another report today showed. A tenth of Japan's 127 million people live in the capital city. The rise in unemployment was led by manufacturers and construction companies, which lost a total of 880,000 jobs, according to figures that aren't adjusted for seasonal variations.
SARS
As a result, the jobless rate among Japanese men rose to 5.7 percent in March from 5.5 percent in February, seasonally adjusted. Unemployment among women fell to 4.8 percent, the lowest since August 2001, from 4.9 percent as health care companies hired more nurses to care for an ageing population. Tokyo Electron Ltd., the world's No. 2 supplier of chip- making equipment, plans to cut 1,000 jobs this year after it said group net loss for the year ended March 31 probably more than doubled from a year earlier to 41 billion yen. Kumagai Gumi Co., Japan's fifth-biggest publicly traded general contractor, said this month it will cut 2,300 jobs over three years, reducing its workforce to about 1,600. The outbreak of severe acute respiratory syndrome, which has killed more than 263 people worldwide and sickened 4,439, may also dent consumer spending as people stay at home to avoid the disease. Japan has two suspected cases of SARS, compared with 2,422 in China.
Insurance Cuts
``The spread of SARS may pose a further risk to an already weak domestic economy,'' said Junichi Makino, senior economist at Daiwa Institute of Research Ltd. There are other risks to spending. Starting in April, the national health insurance program will pay 70 percent of the cost of a visit to the doctor by a salaried worker, down from 80 percent. ``This increases the possibility that spending will deteriorate after this summer,'' said Toshiyuki Hara, senior market economist at Mizuho Securities Co.//www.bloomberg.com