Japan’s jobless rate seen up, Tokyo CPI far below BOJ’s inflation goal

Japan’s unemployment rate probably inched up in April, in the latest sign of a slight deterioration in the job market as the pandemic hits the labour-intensive service sector. Other data is expected to show the Tokyo-area consumer price index (CPI) fell again in May as cuts in mobile phone fees by major carriers added to downward pressure on prices, making the central bank’s 2% inflation goal appear even more elusive.

In the first quarter, the weak indicators will likely highlight the fragile nature of the country’s economic recovery from the pandemic-induced slump. The world’s third-largest economy shrank 5.1%. This is dragged down by private consumption that makes up more than half the economy. Data from the Ministry of Internal Affairs and Communications is expected to show the jobless rate rose 0.1 percentage point to 2.7%.

Takeshi Minami, chief economist at Norinchukin Research Institute said that since the states of emergency were issued in major cities, the employment situation appeared to turn for the worse again among those face-to-face service-sector firms which were forced to suspend business in this pandemic. The jobs-to-applicants ratio held steady at 1.1 in April, as per the data by the labour ministry. This shows that that only about one job was available per job-seeker.

Separate data from the internal ministry, due out at the same time as the job market indicators, is expected to show Tokyo-area core consumer prices. This excludes perishables but include oil products. Market players are closely watching the Tokyo-area CPI. This is a leading price indicator.

Minami said that the core CPI will stay in negative territory for the time being as service consumption remains stagnant due to the state of emergency, despite rising energy prices, while lower cell phone charges helped extend price falls.