Bleak Japan set for jobless rate to rise


Industrial production sank to levels not seen in more than a decade, as companies struggle to keep inventories under control

By staff and wire reports

TOKYO, Japan -- Japan faced a deepening of its economic trough on Thursday, as industrial production sank to levels not seen in 14 years.

And the picture is unlikely to get any prettier on Friday, when a new set of unemployment numbers come out.

The country's industrial production fell 1.8 percent in November from the previous month, the Ministry of Economy, Trade and Industry reported Thursday. Separate figures showed a drop in retail sales.

For November, store sales fell 2.7 percent over the same time last year, the eighth monthly drop in a row. They were up 1.5 percent over the previous month, but that was mainly because stores started end-of-year promotions early.

Sales are expected to drop next month as a result. Prices, wages and spending are dropping in Japan, and some experts fear those trends have started to feed off each other in a deflationary spiral.

Lowest level since 1987

The industrial production dropoff was worse than expected, and almost double the 1.0 percent decline that the ministry had forecast.

Production has plummeted for most of 2001, and is now at its lowest level since November 1987. The numbers seemed to have steadied in October but have now resumed their nosedive.

Ryo Hino, a J.P. Morgan economist, said the most worrying trend is particularly weak demand. Shipments fell 1.4 percent for the month.

Though they cut output 1.8 percent, the low level of shipments meant that businesses made little headway in tackling their high level of inventories. Hino expects companies to keep fighting to reduce inventories for some time as a result.

The bleak picture for Japan's business and industry has spilled over into Japan's jobless rate. It stood at an unprecedented 5.4 percent for October.

It will hit 5.5 percent for November when released Friday, the Nihon Keizai Shimbun reported. That will be the third straight record month.

It also makes it unlikely that Japan will hit the government's projected average jobless rate of 5.2 percent for the fiscal year that ends in March.

Despite tough times for most parts of Japan's economy, Prime Minister Junichiro Koizumi is pushing ahead with attempts to change the way business and industry works.

On Monday, his cabinet adopted a budget for the business year starting in April that cuts government spending by 1.7 percent. It goes to Japan's parliament in January.

Many Japan watchers warn that while medicine is needed long term, now may not be the time for bitter pills for Japan's economy.

Reuters contributed to this report.