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Economy

Japan jobless rate unchanged at 2.9% as policy shift looms

Reducing 'unprecedented' government support seen as threat to household income

TOKYO -- Japan's jobless rate stood at 2.9% in February, unchanged from January, the Statistics Bureau said Tuesday, amid a state of emergency that lasted for 10 weeks through March 21.

The unemployment rate has been on the rise, from an average of 2.4% in 2019 to 2.8% in 2020, though the increase has been cushioned by the government's paycheck protection program, under which businesses that keep workers on the payroll receive subsidies.

The program will be trimmed down from May to cover up to 90% of leave benefits, instead of the current 100%, for businesses outside the hardest-hit industries.

The policy shift is prompted in part by a move to keep the ballooning government deficit in check, and also to encourage redundant workers to move to new industries.

Japan has sharply expanded fiscal outlays in the past 12 months to deal with the pandemic, adding 72% to the original fiscal 2020 budget. "An unprecedented amount of support has been provided by the government. Withdrawing this could create a sharp dive [in household income], so it needs to be done carefully," said Takuya Hoshino, an economist at Dai-ichi Life Research Institute.

Job losses have been concentrated among non-regular workers and customer-facing businesses, such as restaurants and hotels.

The February data showed that the nation's second state of emergency had a much more limited impact on the economy due to its targeted restrictions. Shopping appears to have been stronger in February than January, creating more part-time jobs for young people and resulting in a drop in unemployment to 4.9% in February from 5.8% in January for the 15-24 age group.

In the first lockdown last year in April and May, many part-time jobs evaporated, causing problems for self-supporting college students.

Among industries, job losses in hotels and restaurants were partially covered by gains in information technology, financial services and other sectors, February data showed. Hoshino said that unlike the Lehman crisis, financial markets have stayed upbeat during the pandemic, limiting damage to corporate balance sheets and allowing businesses to continue to spend on investment and hiring.

Still, Japan's economy is projected to have shrunk 1.5%, or an annualized pace of 5.8%, in the January-March quarter, according to a consensus estimate compiled by the Japan Center for Economic Research. The economy is forecast to return to growth in the second quarter.

The jobless rate in Japan compares with 6.2% in the U.S. and 4% in South Korea, according to February figures.

Aggressive policy measures have also helped limit bankruptcies. According to credit research company Tokyo Shoko Research, the number of monthly bankruptcies in February dropped to the lowest level in half a century for the month.

In separately released data on job availability, the ratio of job openings to applicants stood at 1.09 in February, compared with 1.10 in January.

A reading of above 1 indicates that more jobs are available than people seeking employment.

During the global financial crisis, the job availability gauge fell as low as 0.42. The unemployment rate shot up to 5.5%.

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