Japan Unemployment December 2007

Japan's job vacancies fell to a two- year low and the jobless rate was unchanged, adding to evidence that consumer spending may slow. The jobless rate remained at 3.8percent in December, the statistics bureau said today in Tokyo. The number of positions available for each applicant slipped to 0.98.

Job seekers outnumbered positions available last month for a second consecutive month, with the ratio falling to the lowest level since October 2005, the Labor Ministry's report showed. The ratio of jobs to applicants slipped to 1.04 in whole year 2007 from 1.06 in 2006.

In fact the number of unemployed persons in December 2007 was 2.31 million, which was a decrease of 130 thousand or 5.3% from December 2006, while the number of employed persons stood at in December 2007 63.96 million, an increase of 420 thousand or 0.7% on the previous year.



The average unemployment rate for whole year 2007 was 3.9% which was down from the 2006 average of 4.1. The average number of employed persons rose from 63.8 million in 2006 to 64.1 million in 2007.




The statistics office also published earnings and expendidture data for December 2007. Expenditure data for two-or-more-person households showed that average monthly consumption expenditures per household for December 2007 were 351,667 yen, which was up 3.1% in nominal terms and 2.2% in real terms over December 2006.

The income and expenditure data for workers' households showed that average monthly income per household stood at 950,654 yen, which was down 1.8% in nominal terms and 2.7% inreal terms on December 2006.



Consumption expenditure stood at 379,388 yen, up 2.7% in nominal terms and 1.8% in real terms on the previous year. If people are spending slightly more and earning slightly less, then the conclusion is inescapable, they are saving less.



In a separate report we learn that retail sales fell for the first time in five years in 2007, as consumers bought fewer cars and unfavorable weather affected purchases of seasonal items, at least that was the explanation offered by Trade Ministry spokesman Takahide Arai earlier today. The change - reported by METI - was an increase of 0.2% year on year in December 2007.

Japan CPI December 2007

According to the Japanese Statistics Office this morning consumer prices in Japan rose in December at an annual rate of 0.8 per cent according the so called "general index", double November’s pace, as higher oil prices pushed up the index up another time. As David Pilling in the Financial Times:

The faster-than-expected inflation rate is causing a dilemma for the Bank of Japan, which is coming under pressure to lower rates at a time when some board members are increasingly concerned at the public’s inflationary expectations.

Toshihiko Fukui, BoJ governor, trod a fine line in parliamentary testimony Friday, conceding that growth in the year ending March 31 would be in the “low 1 per cent range” against the bank’s previously forecast 1.8 per cent, yet insisting that a virtuous growth cycle remained in tact.

Mr Fukui rejected the premise of questions from Kozo Yamamoto, a long-time foe of the bank in the lower house, who called for the central bank to cut rates from 0.5 per cent immediately to stave off recession.

Actually, beyond the confines of the political arena the dilemma may not be as acute as it seems, since the core-core inflation (ie if we strip out food and energy) is still in negative territory (-0.1% y-o-y) and there is no real sign of any sort of sharp uptick in prices if we look at the chart below.




Also, since most of the leading international economic organisations are forecasting a slowdown in global growth this year, it would seem to be unlikely that oil prices are going to rise much further in the near future (and that is what inflation is about, surely, that prices rise, not that they are simply high), and indeed the possibility that they may slip back somewhat will have to be carefully evaluated and taken into account by the bank.


As Fukui said: “Even if a sense of crisis grows, we will calmly examine conditions and make appropriate monetary policy decisions......We will steer monetary policy based on our belief that Japan can continue to post growth in a stable manner by keeping the current accommodative conditions.”

This phrase was interpreted by many as signalling that although the bank was in no hurry to raise rates, the next move was likely to be up rather than down, but this could equally be seen the other way, since if the economy continues to move on its present downward path, and we don't see another spike in either oil or food, then the present conditions will turn from accommodative to restrictive, and what you could read Fukui as saying is that under those circumstances the bank will act accordingly.


Equally Hiroko Ota, economy minister, is well aware that in many ways energy-related inflation is not good news. “Higher crude oil prices cause Japan nothing good,” she said, adding: “They have a negative impact on consumption as the prices of goods necessary for people’s daily lives have risen while wage increases have been subdued.”


Also the Bank of Japan acknowledged earlier in the week that growth was slowing faster than expected, although they stopped short of abandoning their central scenario that Japan was still on a sustainable growth cycle.

The Bank's Bi-annual “Outlook for Economic Activity and Prices” report is the central tool for signaling mid-term BoJ intentions to markets. In October it predicted that the economy would grow 1.8 per cent in the year to March 2008, higher than the 1.3 per cent forecast by the cabinet office. While the BoJ last Tuesday implied that 1.8 per cent would now be difficult to achieve, for some reason or another they refrained from offering a new number, a stance that many observers found surprising.


The Bank stood by the view that it expected a rebound in the fiscal year to March 2009, for which in October it predicted 2.1 per cent growth, saying: “With a virtuous circle of growth in production, income and spending remaining basically intact, in fiscal 2008 the rate of real GDP is likely to be broadly as projected and slightly higher than the potential growth rate.”

Clearly whether or not this virtuous circle exists when you come to look at the way in which income and spending have failed to move in line with increases in production and reductions in unemployment, but quite possible this bullet will come to be bitten when we move on to the post Fukui era. For now what we may have is a nice old fashioned compromise, where everyone's face is saved, at least in public.

Japan Exports and Trade Surplus December 2007

Japan's export growth slowed for the second consecutive month in December as a decline in U.S. demand reduced sales of items like cars and electronics in what is still the country's largest overseas market. Exports, which were the key factor responsible for almost all of Japan's third-quarter GDP growth, rose 6.9 percent from a year earlier, after climbing 9.7 percent in November, according to data released by the Finance Ministry in Tokyo earlier today.



As demand for Japanese products weakens in the United States exports to the EU and China have steadily been picking up some of the slack - as explained at greater length in this post - and exports to China, Japan's second-largest export market, rose 8.4 percent in December. Exports to the EU - at 1.09 trillion yen - were also up slightly on November, but still below the October high of 1.14 trillion yen.






Today's numbers suggest that what are still record exports to Asia may fail to make up for slowing shipments to the U.S. since a steeper U.S. slowdown could also stifle demand in Asia, and particularly in China, where the risks of a slowdown as the year advances do seem to be growing. Imports rose 12.1 percent in December to a record, causing the trade surplus to narrow to 877.9 billion yen ($8.2 billion).



Instability in financial markets and growing volatility in the carry trade are also producing a rise in the value of the yen, making the outlook for exporters even more gloomy. The yen has gained 5 percent against the dollar over the last year, and has also been rising against the euro of late. The yen traded at 106.44 per dollar at 12:00 p.m. in Tokyo from 106.67 before the report was released.

Half of Japan's shipments overseas are settled in U.S. dollars even though the country is increasingly coming to rely more on the EU and China and other emerging markets for trade.

The yen is fast approaching the point at which companies say they won't be profitable, with a value of 105 yen to the dollar being seen more or less as a break point. Japan's currency is already 8 percent above the level on which Japan's largest exporters calculated their profit forecasts for the year ending March 2008.

China, including Hong Kong, overtook the U.S. as Japan's largest export market in 2007, today's report showed. Exports to the two markets rose to 17.4 trillion yen. Shipments to the U.S. fell slighly - for the first time in four years - to 16.904 trillion yen, down from 16.933 trillion yen in 2006 . Excluding Hong Kong, exports to China totaled 12.8 trillion yen, meaning the U.S. is still Japan's single biggest market.

Japan Consumer Confidence Index December 2007

Japan's consumer confidence dropped to its lowest level in more than four years in December as a combination of falling wages and rising prices continued to squeeze households. The sentiment index slid to 38 last month from 39.8 in November, the Cabinet Office said today in Tokyo. There isn't that much more to say about this at the present time, since it is unfortunately now all too predicatble. Confidence among consumers hasn't been this low since June 2003, when unemployment was close to a postwar high, so the novelty here is the unemployment is pretty low, but still people are being squeezed. This merits a lot more thought beiong given to the why and the wherefore.




All the components in the index are down, and at the same time we also learned to day from Monthly Labour Survey conducted by the Japanese labour ministry that wages nonly showed an annual gain of 0.1 percent in November and this was only the second monthly increase in the 11 months of 2007 for which we now have data.