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MNI (London)
By Hiroshi Inoue
     TOKYO (MNI) - Unemployment is a growing concern for the Bank of Japan, as a
weaker and slower recovery from the Covid-19 shock could see many employees
currently furloughed gradually lose jobs, sending the jobless rate higher,
further eroding confidence and denting spending, MNI understands.
     A total 5.97 million were on adjusted work schemes across Japan in April,
up from from 2.49 million in March, and there is a concern that many of the
near-6 million will slowly be shifted to the ranks of the jobless, the BOJ
worries, pushing the unemployment rate far above April's 2.6%.
     The job-to-applicant ratio fell to 1.32 in April, the lowest level in just
over four years, an indicator that the unemployment rate will rise to 3% or
higher in coming months.
     --GOVT SUBSIDY
     In order to protect employment, as the impact of the virus spread, the
government extended its Employment Adjustment Subsidy to cover the vast majority
of wages until the end of September. An existing system, the government scheme
subsidizes a part of wage payments for firms that don't dismiss employees and
instead adjust employment by asking workers to take leave, even if sales or
production decreases.
     However, bank officials warn that the government's measure will not fully
protect employees longer-term and the BOJ and legislator's have made efforts to
support corporate financing in order to save jobs.
     But much depends on the scale and speed of the recovery. At best
expectations, the schemes will work, bridging into the upswing, and reducing the
risk of bankruptcies and layoffs. However, if the bounceback slows, the likely
slew of resulting corporate failures will likely see a sharp rise in the jobless
rate.
     --BOJ CITES WEAKNESS
     Following the latest policy decision Tuesday, the BOJ statement noted the
"employment and income situation has shown some weakness, and private
consumption has decreased significantly."
     The to now tight labour market was largely the result of the BOJ's
accommodative policy and a main pillar supporting the BOJ view that an improving
output gap has increased upward pressure on consumer prices. That pillar is now
in jeopardy, further threatening momentum toward overall price stability target.
--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com
--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com
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MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com