Japan's unemployment rate has climbed to a record five percent in July. The government will now be forced to use emergency funds set aside to help companies finance new hires.
Japan's jobless rate has hit five percent for the first time in postwar history. The global downturn in demand for electronics and other high tech products, rising bankruptcies and a fragile construction industry are all factors.
Economist Ron Bevacqua of Commerz Securities in Tokyo says the news is likely to create widespread concern. "I think it is psychologically going to be a blow to the average Japanese consumer," he said. Although it was pretty much expected - and everyone in the financial markets expects unemployment to go even higher - to see that five percent number printed in the newspaper is going to be a blow to consumer confidence and will cause consumers to hunker down even further."
The unemployment rate edged up to five percent in July from 4.9 percent a month earlier. The record high level will force the government to use mandated special funds to subsidize the hiring of workers aged 45 and older.
The gloomy data are expected to prompt more calls for additional government measures to help job-seekers. But Japanese Prime Minister Junichiro Koizumi's economic reform plan is likely to create higher jobless levels as unprofitable companies shutdown, public entities are privatized and the banking sector consolidates.
The figures come one day after Japanese electronics giant Toshiba unveiled plans to cut about 10 percent of its workforce or about 18,000 jobs.