The Organization for Economic Cooperation and Development (OECD) had earlier warned that the Japanese economy was heading for a slow down. Proving their apprehension correct, the economic data for February shows that Japan’s unemployment rate rose for the first time in five months to 3.9 percent as companies are struggling with rising production costs and a decline in exports to the US.
For years, Japan has been fighting deflation resulting from excess production of goods. However, the economic scenario has drastically changed this year with rapid rise in consumer prices. In February, the prices of core consumer items including fresh food has recorded 1 percent increase from the price level in the previous year – the fastest rise in nearly 10 years. Most of the inflationary pressure is arising from hike in gasoline and food prices. According to Takehiro Sato, chief economist, Morgan Stanley, both the economies in the US and Japan have already entered a mini-recession that is likely to continue until around April-June quarter.
The trimming of jobs has occurred largely in the small and medium sized companies, as they have been unable to adjust to high oil and raw materials prices. The overall income of households has dropped by 0.1 percent and disposable income fell by 1.1 percent further aggravating the problems of the Japanese economy. The OECD had projected that the GDP growth for the first quarter would be 0.3 percent and predicted a 0.2 percent rise in the second quarter. The organization had said that despite of support from the neighboring buoyant Asian economies, Japan’s growth appears to be softening.
Source: yahoo
