Now in part the decline in unemployment is a natural response to the - largely export driven - extended economic boom Japan has been enjoying recently, but this is certainly not the WHOLE story, since Japan, as is well known, has an ageing population, and in addition the population is actually now declining (and has been since 2005), as, of course, is the population of working age (and hence the workforce, if we take this as the conventional 15-65 age group, but see below). As such, absent immigration (and generally speaking Japan does not have any immigration worthy of mention as can be seen in this post) it is hard to see where Japan will find the labour to sustain economic growth into the future.
(Please click on image to see more clearly).
This chart has been extracted from an excel file which constitutes Table 1 on this page.
Now what can be readily seen is that while the total population started to decline in 2005, the working population (which is Japan is defined as everyone OVER 15) has been climbing (albeit slowly and steadily) for the last couple of years, a feature which is undoubtedly due to the growing proportions of the population in the older old age groups, and slowly increasing life expectancy. On the other hand, if you look at the totals for employed people, you will see that this actually peaked in the late 90s, and while the number has been climbing of late, we have still not reached the peak achieved at that time.
Although the data in the table is not seasonally adjusted, and thus difficult to intrepret, there does seem to have been a significant jump in employment in May 2007 (up to 64,440,000 from 63,351,000 in April, although this may yet be revised). Until we see more data it is hard to know exactly what to make of this, since in general we have been seeing signs that the Japanese economy has been slowing somewhat in 2007.
On point which is also worthy of attention is the percentage of employment which is part-time. This has been growing, and was up to 29% of total dependent employment in 2005 from 19% a decade earlier (this being the latest data I have to hand).
Another aspect which should not be forgotten is that the Japanese are fairly long-living, and participation rates in the higher age groups are high by international standards, as the chart below indicates.
So, all in all, a rather puzzling picture, where one thing seems clear, the current expansion is going to hit labour capacity limits at some point or another.
Update
I have now found some more data on part-time employment as a percentage of total employment. In April 2007 - according to the Provisional Report on the Monthly Labour Survey - there were 11,352,000 part time jobs, and 32,770,000 full time ones, which means that roughly 26/27% of employment was part-time. The Report also makes the following observation:
"Regular employees in April 2007 were increased by 1.6% compared with a year earlier, full-time employees were increased by 0.8%, part-time employees were increased by 3.6%."
Which seems to suggest that part-time employment has been growing rather more rapidly that full-time in recent months.
In line with this observation, the March Report says this:
"Regular employees in March 2007 were increased by 1.5% compared with a year earlier, full-time employees were increased by 0.9%, part-time employees were increased by 3.2%."
The February report says this:
"Regular employees in February 2007 were increased by 1.6% compared with a year earlier, full-time employees were increased by 0.7%, part-time employees were increased by 4.2%."
January this:
"Regular employees in January 2007 were increased by 1.6% compared with a year earlier, full-time employees were increased by 0.9%, part-time employees were increased by 3.3%."
December this:
"Regular employees in December 2006 were increased by 1.4% compared with a year earlier, full-time employees were increased by 0.9%, part-time employees were increased by 2.9%."
So the trend towards part-time work is definitely there, and this is obviously being reflected in average salaries. What will be interesting to look at will be the May 2007 data, to see how much of the new employment this month is part-time.
To get a final idea of what all this means I have looked at the earliest data in this series, for September 1998. At that time there were 34,755,000 full-time employees, which we could compare with only 32,770,000 in April 2007, so in the last ten years the number of full-time jobs has actually FALLEN by nearly 2 million jobs. At the same point the number of part-time jobs was 6,788,000 while by April 2007 this number had risen to 11,352,000, ie it had nearly doubled.
