Japan jobless rate hits 25-year low in January, inflation ticks up

Japan’s jobless rate hit a 25-year low in January and job availability stayed at a two-decade high, government data showed on Friday.

The core consumer inflation in Tokyo, a leading indicator of nationwide price trends, accelerated to 0.9 per cent in February from 0.7 per cent in the previous month, separate data showed.

While inflation remains distant from the Bank of Japan’s 2 per cent target, Friday’s batch of data underscore the central bank’s view that brightening economic prospects and a tight job market will prompt firms to push up prices.

The seasonally adjusted unemployment rate fell to 2.4 per cent in January, down from 2.7 per cent in December and lower than a median market forecast of 2.7 per cent, Internal Affairs ministry said.

That was the highest level since April 1993, when Japan’s economy was still in an asset price bubble, according to Reuters.

Takuji Aida, chief economist at Societe General Securities, said, “We’re seeing a pretty big increase in jobs in markets that are expanding. It’s in line with Japan’s expanding economy.”

 “The jobless rate is likely to stabilize below 2.5 percent and underscore the view Japan is heading toward a sustained exit from deflation,” he said.

The jobs-to-applicants ratio was 1.59, unchanged from the previous month and matching the highest since January 1974. The median forecast was for the index to rise to 1.60.

The pick-up in Tokyo consumer inflation was driven by rises in hotel and package tour prices, reflecting robust demand from Chinese visitors to the city and Japanese tours to South Korea during the winter Olympic Games, the data showed.

Japan’s economy expanded at an annualised 0.5 per cent in October-December, posting its longest continuous expansion since the 1980s boom, thanks to robust capital spending.

But inflation remains distant from the BOJ’s 2.0 per cent target as companies hold off on raising prices and wages, citing uncertainty over the economic outlook.

Japan Prime Minister Shinzo Abe has been pushing companies to raise wages by 3.0 per cent or more to spur consumer spending, piling pressure on firms to spend their some their huge hoards of cash to broaden the benefits of the strengthening economy.