Japan's unemployement data for May is due on 25th June.
The number of job seekers that dropped out of the labour force increased in March and April. This led to a technical improvement in the unemployment rate (it was 3.5% in February), but it probably does not reflect the real situation of the labour market. However, both the manufacturing and non-manufacturing sectors are feeling a shortage of labour, and are now stepping up hiring. Therefore, Societe Generale estimates, the unemployment rate to rise to 3.4% in May from 3.3% in April.
While many companies are increasing hiring, the new positions are likely to be filled easily as many workers who had previously dropped out of the labour force are likely to return to work. In 2015, SocGen expects, the unemployment rate to fall below 3.5%, corresponding to the NAIRU level. This in turn should underpin sentiment just as aggregate wages start to expand, thus enabling Japan to make a full exit from deflation.
"However, if this situation fails to materialise, the BoJ's 2% price stability target will be difficult to achieve. The unemployment rate needs to fall below 3% for the target to be met, but this level currently seems very far away. The job-toapplicant ratio is likely to remain unchanged at 1.17 in May", adds SocGen.
