Japan’s unemployment rate is likely to have dropped further in May. Corporates in Japan have been increasing their activities of hiring since the beginning of the fiscal year in April as they feel a strong sense of labor scarcity. The jobless rate is expected to have fallen to 3.1 percent in May from April’s 3.2 percent, said Societe Generale in a research report.
Moreover, the golden week holiday in 2016 was longer than usual, permitting people to take a longer holiday. This is expected to have resulted in a rise in demand for leisure services by labours. Meanwhile, the labor force is unlikely to have increased that has resulted in the decline of jobless rate. Also, the job-to-applicant ratio is expected to have risen further to 1.35 in May from April’s 1.34, added Societe Generale. Jon-to-applicant ratio is expected to further increase in the future.
Unemployment in Japan has continued to be lower than 3.5 percent. This is where wage increases are to start occurring. But for price levels to attain the 2 percent level set by the BoJ and the government, the jobless rate has to drop below 3 percent and to move towards 2.5 percent. The NAIRU jobless level likely should be at about 3.5 percent for a stable rise of 1 percent in the price level. For a stable 2 percent rise, the NAIRU unemployment level should be around 2.5 percent, noted Societe Generale.
Even if the jobless rate is falling steadily, many factors are putting negative pressure on corporate confidence, such as global economic uncertainty and the longer-than-anticipated after impact of consumption tax hike that will act as a drag on domestic demand rebound. If corporate profits and economic demand do not rise to counter the hiring of corporates, a continued recover of the labor market is unlikely, according to Societe Generale.
The material has been provided by InstaForex Company – www.instaforex.com