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No.251 (2017/12/26)
Economic and Labour Situation in Japan (December 2017)

Japanese Government Plans to Reduce Corporate Tax to Push Wage Hikes

The Japanese government is planning to reward companies that actively invest in human resources through training and higher wages and in productivity growth by enabling them to deduct a certain amount from their tax liabilities. This adjustment could lower the effective corporate tax rate to as low as about 20%. In recent years large companies have been holding on to profits accrued from their brisk business performances, despite repeated calls by the prime minister for employers to lift wages and help stimulate consumption. The government is now offering an inducement to companies to encourage them to change their tune.

Industrial Production
The industrial production preliminary report for October announced a moderate 0.5% rise following a contraction of 1% in the previous month. While production inventories and inventory ratio increased, shipments decreased from the previous month.

2010 average=100
  Seasonally adjusted index Original index
  Index Change from
previous month (%)
Index Change from
previous year (%)
Production

103.0

0.5 104.7 5.9
Shipments 98.9 –0.5 99.6 2.6
Inventories 110.6 3.1 112.1 1.9
Inventory ratio 114.2 3.5 114.9 1.8

Industries that mainly contributed to the increase were as follows: (1) electrical machinery, (2) transport equipment, and (3) general-purpose, production, and business-oriented machinery, in that order. According to the Survey of Production Forecast, industrial production was expected to increase by 2.8% in November and by 3.5% in December.

Family Income and Expenditure Survey in October
(1) Expenditure for Two-or-More-Person Households
The average monthly consumption expenditure per two-or-more-person household in October was 282,872 yen, up 0.3% in nominal terms and unchanged in real terms year-on-year.

(2) Income and Expenditure for Workers' Households
The average monthly income per household stood at 501,416 yen, up 3.2% in nominal terms and 2.9% in real terms year-on-year. The average consumption expenditure was 313,733 yen, up 2.6% in nominal terms and 2.3% in real terms year-on-year.

Labour Force Survey Monthly Results
(1)Employment
The number of employed persons in October was 65.81 million, an increase of 610,000, or 0.9%, over the same month in the previous year.

(2) Unemployment
The number of unemployed persons in October was 1.81 million, a decrease of 140,000, or 7.2%, from the same month in the previous year. The seasonally adjusted unemployment rate in October was unchanged at 2.8%, remaining at the lowest level in 23 years. The unemployment rate for men was unchanged at 2.9% and for women 2.6%, down 0.1 point from the previous month.

(10,000 persons)
  October
figures
Change from previous year
      (%)
Population aged 15 years or over 11,114 –3 0.0
Labour force 6,762 47 0.7
Employed persons 6,581 61 0.9
Employees 5,877 62 1.1
Unemployed persons 181 –14 –7.2
Not in labour force 4,345 –50 –1.1
Labour force participation rate (%) 60.8 0.4 -
Employment rate (%) 59.2 0.6 -
Unemployment rate, original series (%) 2.7 –0.2 -
  Current month Change from previous month
Unemployment rate, seasonally adjusted (%) 2.8 0.0 -

(3) Job Availability
Japan's job availability in October was at the highest level since February 1974, with the ratio of job offers to jobseekers standing at 1.55, up 0.3 point over the previous month. This figure means that there were 155 jobs available for every 100 jobseekers. The ratio of new job offers to applicants, a leading indicator for the labour market, was 2.36, up 0.1 point over the previous month. This figure shows that there are more than two new vacancies available for every new jobseeker. Japan has likely achieved full employment and faces a severe labour shortage.

Consumer Prices
The consumer price index in October was 100.6 (2015 = 100), up 0.2% over the same month of the previous year. The inflation rate continues to hover around zero and remains far below the 2% target by March 2019 set by the Bank of Japan. Despite the seemingly improving economic activities in Japan over the past 10 months, the core inflation index (CPI less food and energy) was up by only 0.2% year-on-year.

October 2017
Index Annual
change (%)
Monthly
change (%)
All items 100.6 0.2 0.0
All items, less fresh food 100.6 0.8 0.2
All items, less fresh food and energy 101.0 0.2 0.1
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