The jobless rate rose in March to its highest in a year, while job availability slipped to a more than three-year low, according to official data released Tuesday.
While Japan's comparatively low jobless rate is the envy of many nations, rises in the politically sensitive figure could lead to calls for Prime Minister Shinzo Abe's government to do more to stimulate the economy as the coronavirus outbreak and containment measures bite into the job market.
The internal affairs ministry said the seasonally adjusted unemployment rate rose to 2.5 percent, its highest level since March last year, and matched economists' 2.5 percent median forecast. The seasonally adjusted number of unemployed in March increased 60,000, or 3.6 percent, from the previous month to 1.72 million.
Among them, 710,000 people voluntarily left their jobs, down 20,000 from a month earlier. There were 430,000 new job seekers, and 450,000 were laid off, with both of those categories seeing an increase of 40,000.
The number of nonregular workers stood at 21.5 million before seasonal adjustment, down 260,000 from a year before, marking the largest fall since officials began compiling comparable data in 2014.
The number of firings and work contract terminations motivated by the effects of COVID-19 stood at 3,391 as of Monday, with many of the cases in sectors related to tourism.
"We need to be very careful about the impact of the novel coronavirus epidemic on employment," Chief Cabinet Secretary Yoshihide Suga said. "We will do all we can to protect employment through measures (for supporting businesses)."
The unemployment rate stood at 2.2 percent in December, the lowest since 1992.
The jobs-to-applicants ratio fell to 1.39 in March, the lowest since September 2016 and below the median forecast of 1.40, welfare ministry figures showed.
The ratio fell in all 47 prefectures, a first since records based on place of work began in February 2005.
"The employment situation is expected to worsen further in April, so I think it's still the start of a deterioration," said Atsushi Takeda, chief economist at Itochu Research Institute. "There is no doubt that the number of unemployed people is rising. I think there will be a sharp reduction in job offers in April."
While conditions in the labor market here aren't as severe as in the United States, unemployment could rise to 4 percent in the months ahead, Takeda said.
"A temporary increase (in unemployment) can't be avoided, I think," he said.
The steep drop-off in the jobs-to-applicants ratio also reflected a change in the survey method from January, a welfare ministry official said.
The ratio had stayed at an over 40-year high of 1.63 from late 2018 through to early last year.
The latest batch of data is likely to increase pressure on the government and the Bank of Japan to take steps to prevent the labor market from worsening as declining demand at home and abroad hits businesses' bottom lines.
To ease the pain on the economy, the BOJ unveiled fresh steps Monday to ease corporate funding strains and pledged to buy unlimited amounts of bonds to keep borrowing costs low as the government tries to stimulate demand by increased spending.
The central bank also slashed its growth forecast and projected inflation would come in well below its 2 percent target for three more years, suggesting its near-term focus will be to fight the coronavirus crisis.
Last week, the government boosted its spending package to a record ¥117 trillion to expand cash payouts to every citizen as the coronavirus outbreak threatens to hit large parts of the economy.
The package will be funded partly by issuing more bonds, straining the government's already tattered finances.
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