Japan Unemployment Rate

The unemployment rate in Japan remained unchanged between November and December 2016 at 3.1%.

Published monthly by the Ministry of Internal Affairs and Communication. Updated to the month of December 2016 (published on January 31st, 2016).

Recent data trend:

The demand/supply balance in the Japanese labour market continues to remain tight. The unemployment rate remains unchanged at 3.1% between November and December 2016. Joblessness has averaged 3.1 during the year, lowest in the last 22 years. Japan is at its full employment level.

Other labour market indicators such as new job offers to applicant ratio show that the demand supply balance remains strained. Job offers to applicant ratio rose to a high of 1.43 in December. This marks the highest level since July 1991. In addition, New job offers to applicant ratio also rose touching 2.18 in December after remaining constant at 2.11 for the past two months.

The tightness in the labour market is caused by the shrinkage in the Japanese working population along with increasing demand for labour in Japan. The working age population in Japan, defined as the population of the age between 15 and 64, has been shrinking rapidly. In 2015, the work age population in Japan fell by as much as 0.8 million people. In 2016, the shrinkage was to the tune of 0.7 million people. Accordingly, job applicants have been declining by 5 to 6% per year in the last few years. The ageing and shrinking Japan population is countering the efforts of BoJ and government to stimulate demand and achieve higher level of growth rates.

Wage growth continues to remain a cause of concern. It is an important stimulus for domestic demand but we find that Japanese companies are still reluctant to raise wages despite the rising corporate profit. This reflects that the companies expect the bullish scene to cease. Another reason for the low sticky wages in Japan is the highly regulated labour market which provides strong employment protection to permanent workers, discouraging the firms to raise wages. So, an overhaul of the labour market is required to make the labour market more flexible.

 

The strained labour supply and high demand situation is expected to raise wages and trigger a wage price inflation spiral. But, despite a full employment situation Japan continues to face the deflationary situation.

Brief overview of “Unemployment rate”

 

Unemployment rate is the ratio of unemployed to total working population. One needs to be actively searching for work to be recognized as an unemployed. Japanese unemployment rate has been one of the lowest among OECD countries alongside South Korea and Norway. NAIRU, the Non-Accelerating-Inflation-Rate of Unemployment rate, was considered to lie between 3.5% and 4.5% in Japan. As the current unemployment rate is already below the lower range of the NAIRU, the unemployment rate gap, the difference between NAIRU and the actual unemployment rate, should be exerting an upward pressure to wage inflation. Evidently though, the gap must be a very weak factor for the determination of wage inflation dynamics in Japan.

 

For more information, visit the official government page

Labor participation rate

Source: MIAC, JMA.

Note: Seasonally adjusted labor participation rate is calculated by dividing seasonally adjusted labor force by population of 15 years old and over.

The Next Release Date: March  3rd, 2017.