The nation’s unemployment rate, which hit an all-time high of 5 percent in July, may present the greatest threat to Prime Minister Junichiro Koizumi’s reforms, begging the question, “Is reform worth the pain?”
It’s a question that the crowds filling Tokyo’s Hello Work public job search centers have been asking for a while. Here, men in their 40s wearing business suits eagerly scan job descriptions titled “collection agent for consumer finance company,” “apartment caretaker” and “metal plating technician.”
A wave of massive corporate restructuring has finally reached Japan’s leading high-tech companies, which had retained competitiveness during prolonged economic stagnation.
Facing a global downturn in high-tech industries, Toshiba Corp., Fujitsu Ltd., NEC Corp. and Hitachi Ltd. have all announced drastic restructuring plans that will cost some 57,000 people their jobs.
“Worsened prospects overseas have finally convinced those companies to cut high-cost labor,” said Takashi Kumon, chief economist at Dai-Ichi Kangyo Research Institute.
As hopes for a early recovery fade, more companies are likely to follow suit. Falling consumption and increased competition abroad are likely to lift the unemployment rate to 5.5 percent by the end of the fiscal year, said Kumon. According to Teikoku Databank, a private credit research agency, some 84,000 workers lost their jobs due to the collapse of their companies between January and June.
These figures don’t factor in the effects of Koizumi’s proposed reforms, he noted.
Forcing banks to write off more of their bad loans is expected to trigger further bankruptcies and more job losses. The government says that writing off banks’ bad loans would cost some 390,000 to 600,000 jobs, a projection widely viewed as conservative.
“It’s easy to talk about pain, until the bleeding starts,” said Yasunari Ueno, chief market economist at Mizuho Securities Co., warning that a public backlash could put the brakes on Koizumi’s reforms.
“The Japanese people have not seen unemployment at these levels since immediately after World War II,” he said.
One of the largest challenges to the Koizumi administration is dealing with a mismatch between the skills that growth sector industries need and those of displaced workers.
In Tokyo, 183,718 workers signed up at Hello Work centers for 115,735 job openings, an average of 0.63 positions per job hunter. Compare that to 3.17 information processing posts available per job hunter for those with required qualifications.
The fact that unemployment did not fall even as the job vacancy rate rose from 1.9 percent in April 1999 to 2.7 percent in December 2000 shows the extent of the skills mismatch.
And despite numerous training programs, there is no guarantee job hunters will land jobs.
Of the 277 who enrolled at Tokyo job programs for workers aged 45 and older, only 54.9 percent found jobs after the program ended in March, according to Hello Work Iidabashi.
Creating a safety net for the crowds that are sure to surge at job search centers is going to be costly, warns Peter Morgan, chief economist of HSBC Securities Ltd.
“Koizumi is going to have to balance his pledge for fiscal stringency with the need for a safety net that will help workers in a society that has yet to develop the infrastructure to support labor mobility,” Morgan said.
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