Japan: economic recovery in June confirmed by several indicators

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Surprise drop in unemployment and rebound above industrial production expectations: two indicators published on Friday confirmed the restart of the Japanese economy in June after the state of emergency put in place in April-May in the country in the face of the coronavirus.

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The proportion of job seekers in relation to the total labor force stood at 2.8% last month, after 2.9% in May and when the consensus of economists had predicted a further rise at 3.1%.

A sign of the resumption of activity in the country, partial unemployment, which affected nearly 6 million Japanese at the peak of the state of emergency in the country in April, fell to 2.36 million people in June (nearly 4% of the working population), according to data from the Ministry of Home Affairs.

Even if the economic crisis linked to the pandemic is hitting the country hard, it still faces a labor shortage in various sectors in the face of the significant demographic aging of its population.

This particular local context meant that many Japanese companies preferred not to lay off their employees during the state of emergency, to avoid a potentially lengthy recruitment process when the activity restarted.

The ratio between supply and demand for employment, however, narrowed further in June, to 111 offers for 100 applicants, against 120 offers for 100 applicants in May, detailed the ministry.

The unemployment rate in Japan should therefore increase again in the coming months, because the demand for employment “is increasing much faster” than the supply, according to a note from Capital Economics, which still expects a rate of unemployment close to 4% at the end of the year.

Automobiles, machine tools, plastics

Another positive surprise came from Japanese industrial production, which rose 2.7% in June on a month-to-month basis as Bloomberg consensus analysts expected a more moderate rebound (+ 1%).

This ends a four-month string of industrial production declines due to the pandemic, including a 9.8% plunge in April – a record since the Fukushima nuclear disaster in 2011 – and a drop 8.9% in May.

Shipments of Japanese manufactured goods also rose 5.2% in June over one month, but inventories continued to decline (-2.4%), according to figures from the Ministry of Economy, Trade and Commerce. ‘Industry (Meti).

The auto, machine tool and plastic products sectors were the main contributors to the rebound in production in June, according to the Meti.

Despite the uncertainties linked to the Covid-19 pandemic which is regaining ground around the world, Japanese manufacturers surveyed by the ministry are betting on a sharp increase of 11.2% in their production in July over one month and 9.2% in August.

Retail sales in Japan also rebounded sharply in June over one month (+ 13.1%), according to another indicator released Thursday, also above expectations.

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