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Japan jobless rate to hit record as output slumps

Japan’s jobless rate is forecast to rise to a record high in the first quarter of 2010 as companies cut output in response to declining demand both at home and abroad, a Reuters poll showed.

business Updated: Apr 08, 2009 19:53 IST

Japan’s jobless rate is forecast to rise to a record high in the first quarter of 2010 as companies cut output in response to declining demand both at home and abroad, a Reuters poll showed.

Economists also expect gross domestic product (GDP) to continue shrinking in the third quarter, making their forecast a record six consecutive quarters of decline.

They also sharply downgraded forecasts for industrial production as the global slump weighs on Japan’s export-focused economy.

The numbers highlight the urgent task facing the government as it prepares to double fiscal stimulus spending to counter the worst recession since World War Two.

“Unemployment lags production, so we will see the jobless rate rise steadily from here on,” said Mitsumaru Kumagai, senior economist at Daiwa Institute of Research.

“Government schemes such as work sharing are likely to limit some of the rise in the jobless rate, but it is basically on an upward trend as the economy is in pretty bad shape.”

The survey of 20 economists taken April 1-8 showed the unemployment rate is expected to rise to 5.6 percent in the first quarter of next year. That would be the highest since the government began compiling data in July 1947.

In a poll last quarter, economists expected the jobless rate to rise to a high of 4.9 percent in the second quarter of 2010.

Japan gave details of new spending worth around $100 billion or around 2 percent of GDP on Wednesday, its fourth economic package in the past year.

The latest steps will include the creation of a safety net for contract workers, measures to help corporate financing and increased spending on solar power systems, Finance Minister Kaoru Yosano has said.

Heavy dependence on exports has left Japan particularly vulnerable to a sharp decline in global trade as exporters such as Toyota Motor cut jobs and plant investment.

Data on Thursday may show machinery orders, a leading indicator of capital expenditure, fell 6.7 percent in February, more than twice the pace of decline in January.

The economy is expected to shrink 3.3 percent in the three months to March, 0.4 percent in the following quarter and 0.1 percent in the third quarter, according to the poll.

That would mark an unprecedented six straight quarters of contraction, the longest slide in GDP on record. The median estimate in last month’s poll was for the economy to be flat in the third quarter.

Industrial production is forecast to have tumbled by 33.9 percent in the first quarter from a year earlier and 32.6 percent in the second quarter, sharply lower than a survey last quarter that showed declines of 17.8 percent and 17.4 percent, respectively.

A wider sample of over 30 economists also expect the Bank of Japan to keep its benchmark interest rate at 0.10 percent until the end of next year, unchanged from last month’s survey.