TOKYO, Dec 28: Japan’s year looked to be closing on a depressing note on Saturday as new unemployment figures showed a record high of 5.5 per cent reached in November, with predictions of worse to come.

Adding to the country’s woes, the 27th consecutive monthly fall in nationwide consumer prices also raised the spectre of deflation.

Japan is now in a classic recessionary period, said Hisashi Yamada, economist with the Japan Research Institute (JRI). The job situation, falling prices, and a number of other economic indicators are simply reflecting that.

The number of unemployed grew 410,000 to 3.50 million in November from a year earlier, the Ministry of Public Management, Home Affairs, Posts and Telecommunications said Saturday.

The jobless rate, setting a record high for the third consecutive month, topping October’s figure of 5.4 per cent.

Further raising concerns, the number of unemployed heads of households rose by 180,000 to 1.01 million, with their jobless rate standing at 3.8 percent, the ministry said. This was also a record high since 1953 when the government started compiling unemployment data.

HSBC Securities economist, Peter Morgan, said the rise of the unemployment figure showed the recession was deepening.

The weakening of the labour market suggests that corporate bankruptcies and restructuring are accelerating, he said.

Japanese Prime Minister Junichiro Koizumi said rising unemployment was the biggest issue facing the Japanese economy at the moment.

We need to adopt a dual strategy. We must address the question of what we can do to help the unemployed and the question of how to create new jobs, Koizumi told reporters.

JRI’s Yamada said the only way out of a recession was for the government to promote structural reforms.

Yasuaki Kudamatsu, an economist at the Tsubasa Research Institute, said the employment situation was set to worsen, however.

Kudamatsu said Japanese firms have been reducing production levels since the summer so they need fewer people.

We expect Japan’s average unemployment rate in the year to March 2003 to be 6.5 per cent. This is estimated to reach 7.3 per cent in the year to March 2004, he said.

In the next two years, banks will go through a intense period of processing bad loans. That means the number of bankruptcies will increase, while corporate earnings deteriorate, he said.

HSBC’s Morgan said he expected the jobless rate to hit six per cent by the middle of 2002.

There was more bad news as Japanese consumer prices in November fell 1.0 per cent from a year earlier in the 27th consecutive monthly fall, the ministry said, raising fears of a deflationary spiral.

Consumer prices in Tokyo, a leading indicator of nationwide inflation, fell 1.5 per cent year-on-year in December, following a revised fall of 1.3 per cent in the previous month.—AFP