Japan jobless rate drops for first time in three months

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Japan jobless rate drops for first time in three months

Japan's unemployment rate has dropped for the first time in three months, potentially feeding into higher wages and offering a boost to the Bank of Japan's sustainable inflation goal.

The jobless rate fell to 2.6% in April, down from 2.8% in March. The unemployment rate was expected to drop to 2.7% from a year earlier. The number of people without jobs dropped by 150,000 from the previous month.

The job-to-applicants ratio remained unchanged at 1.32 from the previous month, meaning there were 132 jobs available to every 100 applicants.

Tuesday's employment figures reflect positive developments in the Japanese economy, which appears to be showing further signs of recovery from the pandemic. The tightening labor market could boost wages and support sustainable inflation, a scenario which both the government and the BoJ are looking for.

The Central Bank said that the results of wage talks to date suggest substantial gains in both small and large companies and part-time workers, citing figures from Japan's labor union Rengo.

But Ueda, a former governor of Japan, has frequently signaled his desire to maintain policy flexibility and not rush to the conclusions that sustainable inflation has been achieved.

The employment portion of the Jibun Bank PMI survey suggests that the labor market has remained tightened in May. As virus restrictions have been relaxed since March, Japanese companies have been grappling with an increasing labor shortage. The BOJ's latest report said firms are facing the worst manpower constraints in about four years.

The service sector is particularly impacted by a recovery driven by inbound tourists and pent-up domestic demand, leading to a labor shortage. In late April, almost 75% of Japanese hotel operators reported a shortage of full-time employees, according to a Teikoku Databank survey.

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