Both the manufacturing and non-manufacturing sectors are now making the necessary increases in hiring. Many workers who had previously dropped out of the labour force have returned to work as the number of employees has increased.
The unemployment rate is expected to remain unchanged at 3.5% in March. In 2015, the unemployment rate to fall below 3.5%, which corresponds to the NAIRU level that will underpin the sentiment at the present time that the expansion of aggregate wages is allowing Japan to make a full exit from deflation, notes Societe Generale.
Thus, the wage increase is expected to help push up inflation, which will then accelerate yet another further wage increase. However, if this is not realized, the BoJ's 2% price stability target will be difficult to achieve. The job-to-applicant ratio is likely to reach 1.15 in March (unchanged from February).
