By Yasuhiko Seki

TOKYO (MNI) – Japan’s unemployment rate dropped unexpectedly to a
two-year low of 4.6% in February as Japan Inc rushed to hoard workers in
light of an upturn in global demand, government data showed on Tuesday.

But the rate will move higher in coming months because of the
adverse economic impact caused by the March 11 earthquake, analysts
warned. The quake has wrecked numerous production facilities ranging
from Toyota Motor Corp to key chipmaker Renesas Electronics Corp,
disrupted distribution networks in the Tohoku area, and sharply reduced
the electrical power supply in eastern Japan.

Japan’s unemployment rate in February was the lowest since February
2009, when the jobless rate stood at 4.5%, and down sharply from 4.9% in
January.

The seasonally adjusted unemployment rate for February was sharply
lower than the median forecast of 4.9% in an MNI survey of economists.

The February figure might have biased slightly upward because the
government said data from its survey in northeastern Japan was unable to
be delivered to the Ministry of Internal Affairs and Communications
because of transportation disruptions caused by the earthquake. That
region tends to have a jobless rate at or above the national level.

Still, “the gap in data gathering did not have a material impact on
the improving trend of the labor market,” a ministry official said.

Separately, the Ministry of Health, Labour and Welfare said that
the ratio of job offers to job seekers at government placement offices
rose to a seasonally adjusted 0.62 in February from 0.61 in January, as
expected.

The February reading, which means there were 62 job openings for
every 100 job seekers, was the highest since January 2009, when it was
0.64.

“The set of labor data underscored brisk corporate demand for new
workforce back in February, when Japanese companies were on the mend,”
said Kazuto Uchida, chief economist at Bank of Tokyo Mitsubishi UFJ.

Japan’s industrial output rose for a third straight month in
January while the nation’s exports logged the 15th straight year-on-year
gain in February, according to government data.

“But this was the old story, as the March 11 earthquake changed the
future course (of the economy) completely,” Uchida said.

The government said last week that the massive damage inflicted by
the March 11 earthquake on Japan’s northeastern Pacific coast is
estimated at up to Y25 trillion ($309 billion), making it the costliest
natural disaster in the country’s post-war history.

The official estimate, which was the first released after the
tsunami caused by the quake devastated fishing ports and farmlands, was
based on the assumption that 80% of existing buildings and factories in
Iwate, Miyagi and Fukushima prefectures in northern Japan were damaged.

The estimated damage would exceed the toll of around Y9.6 trillion
from the Great Hanshin Earthquake, which hit western Japanese port city
of Kobe on Jan. 17, 1995.

“The jobless rate may jump to above the 5%-mark as the quake is
likely to have slashed the nation’s industrial production by between 10%
and 20% from the pre-quake level,” Uchida said.

The combined lost production of Japan’s eight passenger car makers
and four truck manufacturers is estimated at some 385,000 vehicles as a
result of the earthquake and tsunami, the Nikkei reported over the
weekend.

The figure represents almost 5% of annual output, the business
daily said.

Toyota will cut production by about 140,000 units, while Honda
Motor Co’s production will fall by 46,600 vehicles, Nissan Motor Co’s
production is expected to slide by 42,000 and Mazda Motor Corp’s output
will decline by 31,000 units, according to the report.

The Ministry of Internal Affairs and Communications said that
earthquake damage prevented it from receiving data already collected in
three prefectures — Iwate, Miyagi and Fukushima.

To compensate for the missing data, the national average figure for
February was calculated by assuming that the employment conditions in
the three prefectures, which account for about 5% of the total sample,
were the same as the average of other regions, the ministry said.

Despite the sharp drop in the unemployment rate in February, the
government continued to assess labor market conditions as “severe”
because the number of the unemployed was still above three million.

In February, the number of payroll jobs jumped by a seasonally
adjusted 370,000 month-on-month, or 0.6%, to 63.06 million, showing the
third consecutive gain, after having risen 170,000 in January.

The number of unemployed fell by a seasonally adjusted 190,000 from
the previous month, or 5.9%, to 3.03 million, posting the fourth
consecutive m/m drop, after falling 20,000 in January.

The average unemployment rates in 2010 stood at a seasonally
adjusted 5.1% in Iwate, 5.8% in Miyagi and 5.1% in Fukushima while the
national rate was at 5.1%, ministry data showed.

But the earthquake’s effect on jobs is already evident among quake
survivors.

“I was forced to take an unpaid leave as the company shut down
operations immediately after the March 11 earthquake,” said a woman in
her early 50’s who was living in Iwaki City, about 30 kilometers south
of the troubled Fukushima Dai-ichi nuclear power plant.

She and her middle-school son has moved to Kitaibaraki City, just
south of Iwaki, to seek refuge at her brother’s place. The quake hit the
factory and office of the firm she was working for.

“I just wonder how I can make a living from now on,” she said.

tokyo@marketnews.com
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