The seasonally adjusted unemployment rate averaged 4.3 percent in fiscal 2005, down 0.3 percentage point from fiscal 2004 and the lowest in seven years, the government said Friday.
The jobless rate matched the 4.3 percent logged in fiscal 1998, signaling economic recovery has taken root.
In March alone, the jobless rate came to 4.1 percent, unchanged from the previous month, the report says.
The number of people without jobs averaged 2.89 million in fiscal 2005, down 190,000 from the previous year for the third-straight year of decline, the Ministry of Internal Affairs and Communications said in a preliminary report.
The average jobless rate for men came to 4.5 percent, down 0.3 point from the previous year and the best reading since fiscal 1998.
The average unemployment rate for women was 4.1 percent, down 0.2 point and the lowest since fiscal 1997.
Economists said the widening economic recovery spurred by firm domestic demand and brisk exports is expected to create more jobs in the coming months, with some forecasting the jobless rate will slide to 3 percent this year.
"We see steady and sustained improvements in labor market conditions this year, with the unemployment rate dropping to around 4 percent," said John Richards, head of research at Barclays Capital Japan Ltd., projecting that the jobless rate will fall to 3.9 percent in calendar 2006.
According to the report, the number of jobholders grew 330,000 to an average 63.65 million in fiscal 2005 for the third-consecutive yearly expansion.
The country's employment situation may have improved, but the job market for the young still remains severe.
The jobless rate for people aged 15 to 24 came to 8.5 percent, down from 9.2 percent, according to the report.
The rate for men in this age bracket came to 9.6 percent. For women it was 7.4 percent.