I wrote here a month ago that Japanese were wondering where talk of recovery was coming from. Japan had just reported its highest unemployment rate in six years at 5.4%, and its total number of jobless at 3.5 million. Credit Suisse Japan chief economist Hiromichi Shirakawa said, “Employment conditions are taking a turn for the worse.”
A month later, they still are.
The unemployment rate reported last week rose to 5.7%, well above the 5.5% expected and, more to the point, the highest it’s ever been. The total number of jobless is now 3.6 million. The ratio of job offers to job seekers fell to an all-time low of 0.42 in July, meaning every 100 job seekers must fight over just 42 offers. Fear of deflation persists, as consumer prices slipped 2.2% in July from the year prior, on top of a 1.7% dip in June. As in the US, Japan’s families are cutting back. Average household spending in July declined 2% from a year earlier.
Toyota is slashing production capacity, and Japan Airlines is laying off 10% of its workforce. Companies in every sector are reducing hours worked per week, forcing many employees to find part-time jobs to support their families.
Unfortunately, forecasts for Japan’s unemployment rate call for it to keep rising for some time yet. Barclays Capital in Tokyo, for instance, sees it reaching 5.9% in the first half of 2010.
The situation is eerily familiar to older Japanese. These conditions, particularly deflation, are what crippled the Japanese economy during the “lost decade” of the 1990s. As we close in on Japan having been in recession for 20 years, talk on the street is that it’s silly to call it a recession anymore. It’s just the way the economy is. The aberration isn’t what people are calling bad times; the aberration was what they called good times.
“We see consumption as a major concern for the Japanese economy,” said Chiwoong Lee, an economist at Goldman Sachs in Tokyo. “[Friday]’s labor market release revealed worse unemployment … than the market expected … and wages remain on a downtrend.”
Daisuke Uno, chief strategist in Tokyo at Sumitomo Mitsui Banking Corp., isn’t optimistic, either. “Jobs data and prices continue to deteriorate, indicating the economy has yet to hit the bottom,” he said.
That’s one reason Japan made a rare show of unity in “throwing the bums out” of political office last week. Almost 70% voter turnout — the highest since the current electoral process took effect in 1996 — put 308 of the Lower House’s 480 seats under members of the Democratic Party of Japan (DPJ). Only 241 were needed for a simple majority, obviously, making this a notable landslide. It marks the first time since 1955 that the Liberal Democratic Party (LDP) has not controlled Tokyo.
The DPJ plans to work quickly with its army of new and young faces to restructure the government’s economic stimulus package, and create a new policy writing board called the National Strategy Office to go through Japan’s budget and re-set policies.
I like to consult with older people to see what to expect. The ones I spoke with said, “Not much.” To them it looks like just another way of saying that change is coming, which has been said dozens of times over the past few decades, but nobody in office has any real power.
The last time Japan was this excited about its government was when Junichiro Koizumi became prime minister in 2001. His flowing hair and maverick ways were sure to shake up the system, went the refrain. Then, in 2005, he led his LDP party to one of the biggest majorities in recent Japanese history. Great! So, what came of it all?
A change in uniforms at the post office. Really.
The privatization of the nation’s post office and its huge postal savings system was supposed to inject $3 trillion of private capital into the economy and get things moving again. To see how that went, re-read the first part of this article. Stamps cost the same, the post offices are all in the same places, the same people work at them, letters arrive as before, but instead of being called Japan Post it’s now called Japan Post Holdings and abbreviated JP on signs and uniforms. Oh, and customers can now transfer assets from the post office to private banks at the ATM. Other than that, life goes on as before.
Just as in America, corporate interests are the real leaders. Elections and politicians are mainly for show so the electorate can get riled up over something, but those who fund politicians and pull their strings don’t care who’s name is on the door as long as he or she can vote, sign, and stamp as needed. As with Obama’s enthusiastic base of six months ago that’s already abandoned him once he turned out to be like his predecessors, so it will go with this supposedly significant election in Japan.
What do the old people here say about that? Something along the lines of, “Oh well, it’s just about time for our lovely autumn colors. Where shall we view them this year?”
Figuring that out is a much better use of time than projecting what difference the DPJ will make.
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