Japan's unemployment rate rose to its highest level in more than five years as companies slashed jobs to cope with the worst post-war recession in the world's second largest economy, data showed yesterday.
On a brighter note, consumer spending rose for the first time in 16 months, supported by the government's economic stimulus efforts.
The jobless rate climbed to 5.2 percent in May - a level last seen in September 2003 - up from 5.0 in April, the internal affairs ministry said.
While hopes are mounting that Japan's economy has come through the worst of its export and production slump, there are concerns that unemployment may rise further as companies seek to recover from heavy financial losses.
The jobless rate, which was slightly worse than expected, is close to a post-World War II high of 5.5 percent, which was last seen in April 2003.
The number of people in unemployment rose by 770,000, or 28.5 percent, from a year earlier to 3.47 million.
Many Japanese companies, particularly exporters, have moved swiftly to cut jobs and production in response to a slump in demand caused by the global economic downturn.
There were only 44 job offers for every 100 job seekers in May, a record low and down from 46 in April, a separate report from the labour ministry showed.
But some analysts expressed optimism that the jobs market situation may start to stabilise before long.
"The jobless rate worsened slightly but is almost peaking out," said Hideyuki Araki, an economist at the Resona Research Institute.
"We are not in a vicious spiral of higher unemployment prompting consumers to tighten their purse strings, further damaging corporate earnings," he said.
Japanese household spending edged up 0.3 percent in May from a year earlier, marking the first increase in 16 months, government data showed yesterday.
Consumer spending is being propped up by the government's economic stimulus measures, but the boost will eventually fade, said Takuji Aida, economist at UBS Investment Research.
"Spending was solid for the April-June period thanks to the government's economic package," he said.
"But it will post only a slight rise in July-September" because of a weak jobs market and sluggish wages, Aida said.
The government has announced a series of emergency spending packages to revive Asia's biggest economy, including cash handouts for households and incentives to buy fuel-efficient cars.
Japan entered recession in the second quarter of 2008 as its heavy reliance on overseas markets as an engine of economic growth left it vulnerable to the fallout from the global economic crisis.
The economy suffered its worst contraction in the first quarter of 2009 since comparable records began in 1955, shrinking at an annualised pace of 14.2 percent.
Experts say a full-fledged recovery is unlikely in Japan until demand picks up in major overseas markets such as the United States and Europe.
Reflecting the tough conditions facing many companies, the government said yesterday that it would throw a 30-billion-yen (US$310 million) lifeline to troubled chipmaker Elpida Memory Inc as part of a wider rescue package.
Elpida, the world's third-largest maker of dynamic random access memory (DRAM) chips used in mobile phones and home electronics, has been hit hard by the global economic downturn.