The Japanese Labour Force

The Japanese labour force has risen for the first time in eight years as women and those over 60 are drawn back to the jobs market in a sign of the strength of Japan’s cyclical recovery, now in its fifth year.

The willingness of those who left the jobs market to re-enter also shows the mechanisms by which the labour market might respond to the challenges of an ageing society, which is shrinking the size of the traditional workforce.

An analysis in Monday’s Nikkei newspaper found that Japan’s labour force, comprising those in jobs as well as those seeking work, rose by 150,000 to 66.54m in the year to April.

Separate data released on Monday by the labour ministry showed the total number or regular employees rose 0.6 per cent in March from a year earlier, with full-timers up 0.6 per cent, outpacing the rise in part-timers, up 0.3 per cent.

Part of the explanation is that people discouraged from looking for work have come back to the labour market amid brighter job prospects, say labour economists.

Recent surveys show that after years of excess labour capacity there are now more jobs available than job-seekers to fill them. Earlier this year, the ratio rose to 104 jobs per 100 applicants, though it has since slipped back marginally.

According to official figures, the number of women in the labour force has risen 220,000 in the past three years to 27.52m. By last year, there were also 9.67m people aged 60 or over either working or looking for work, a 450,000 increase from five years earlier.

Until 2000, the official retirement age was 60, but this is now being raised incrementally to 65 by 2013.

The Bank of Japan has been carefully monitoring the labour market which it views as a vital component in ensuring sustainable growth. Bank officials say every business sector is now suffering from labour shortages, which could push up wages and lead to further hiring of people who had drifted out of the labour market.

Many companies, the BoJ said in its recent six-monthly outlook report, are “experiencing constraints arising from insufficient labour”, the strongest in more than a decade.

Richard Jerram, economist at Macquarie Securities, said the rise in workers was a cyclical improvement and did not mean Japan could buck its long-term demographics.

Japan’s baby-boom generation is expected to start retiring on mass from next year.

That could see a resumption of a fall in the workforce, which had been declining at about 0.6 per cent a year, economists say.

In 2004, the number of men aged between 17 and 64 fell by 170,000. About a fifth of Japan’s population, which began to shrink overall last year, is aged over 65.

Atsushi Seike, a labour economist at Keio university, said the workforce was bound to get older as people lived longer and as changing pension rules forced people to delay their retirement longer.

However, this did not mean Japan’s unemployment rate, now 4.1 per cent, would return to previous levels. In 1992, he said, when the labour market was last as tight as now, unemployment was 2.2 per cent.

Older workers and part-time workers – the latter category of now accounts for a third of workers – spent longer between jobs than full-time younger workers, he said, pushing up the “structural unemployment rate”.