10/29 19:13 Japan Jobless Rate at 5.3%, Biggest Gain in 34 Years (Update3) By Yoshiko Matsushita, with reporting by Ann Saphir

Tokyo, Oct. 30 (Bloomberg) -- Japan's jobless rose to a record 5.3 percent in September, posting its biggest increase in more than 34 years as manufacturers and retailers cut tens of thousands of staff.

Stocks fell after the government said 400,000 jobs disappeared from the world's second-biggest economy last month. The loss of jobs threatens to overwhelm a 350 billion yen ($3 billion) government plan, approved last week, to hire 450,000 forestry workers, parking officers and teachers' aides.

Prime Minister Junichiro Koizumi will either be forced to spend more money and break his self-imposed 30 trillion yen cap on new bond sales, or accept higher unemployment as companies from NTT Corp. to Fujitsu Ltd. sack thousands more in a country where a job for life has long been considered a right.

The jump in unemployment ``will fuel debate within the government whether it needs to come up with a second extra budget,'' said Tomoko Fujii, a senior economist at Nikko Salomon Smith Barney Ltd., who expects the jobless rate to rise to 6 percent within six months. ``The problem is that they have no more money to spend.''

The increase in the jobless rate from 5 percent in August -- the biggest increase since March 1967 -- suggests tens of thousands of workers who accepted early retirement at retailer Daiei Inc., Toshiba Corp., Isuzu Motors Co. and other companies are returning to the workforce in search of a new job. Economists had expected the jobless rate to rise to 5.1 percent.

The benchmark Nikkei 225 stock average fell 2.8 percent in early trade, with Ito-Yokado Co., the nation's biggest retailer, Mizuho Holdings Inc., the biggest bank, and other companies that do most of their business at home among the biggest decliners. The broader Topix index fell 3 percent.

Saving, Not Spending

The jobless rate -- which started the year at 4.9 percent - may skyrocket as more people look for work. The Bank of Japan yesterday said the economy will probably shrink this fiscal year and next, which would be longer than the three recessions the nation of 126 million people has endured since the so-called bubble economy burst in the early 1990s.

Rising unemployment has prompted people to save more amid fear they'll be next to lose their job. Spending by families headed by a salaried worker rose 1.3 percent last month, from August.

From a year earlier, spending fell 1.3 percent, the sixth drop from year-earlier levels, and the propensity-to-spend ratio, which falls when people save more and spend less, dropped to 70.3 percent last month, the lowest since November 2000. Consumer spending makes up about 55 percent of the economy.

Mounting Losses

Manufacturers, who employ about one-in-five Japanese workers, cut 220,000 jobs last month. Manufacturing is stuck in a nine-month slump, with a report yesterday showing industrial production fell last month to the lowest since January 1994.

Since July, technology companies, including NEC Corp., Kyocera Corp. and Hitachi Ltd., have announced more than 100,000 job cuts. Kobe Steel Ltd. is also paring staff, and other smokestack industries may follow suit as exports fall after last month's attacks on the U.S. The drop in production last month was led by automakers.

``The jobless rate will keep rising as the economy worsens,'' said Yasukazu Shimizu, an economist at Aozora Bank Ltd., who expects unemployment to climb to 6 percent soon. ``Companies have no choice but to cut excess staff.''

People worked an average 41 hours a week last month, down 1 1/2- hours from August, and the lowest since at least February 2000.

Harder to Find

Wholesalers and retailers shed 380,000 jobs, and 130,000 jobs went in transport and telecommunications companies. Those losses will only mount -- Nippon Telegraph and Telephone Corp. last week said it will cut 12,000 jobs at its regional units NTT East and NTT West by March 2003.

Smaller companies are also being hit. Women's apparel retailer Suzutan will probably close 100 of its 423 stores by 2004, and reduce its 1000-strong workforce by a fifth.

Jobs are also harder to come by. There were 57 jobs for every 100 applicants at state-run job agencies last month, down from 59 in August and the lowest in 16 months.

Part-time work is also drying up. The number of part-timers fell 3.7 percent last month to 5.4 million, the first drop in almost five years. The number of full-time workers declined 570,000 from a year ago to 46.3 million. People doing day-labor rose almost a quarter to 11.7 million, the second consecutive increase.

©2001 Bloomberg L.P. All rights reserved. Terms of Service, Privacy Policy and Trademarks.

-- Guy Daley (guydaley1@netzero.net), October 29, 2001