Japan's unemployment rate fell to 5.5% in August after reaching a record high a month earlier, the government said Friday.
The jobless rate in the world's No. 2 economy hit 5.7% in July, the highest level in the country's post-World War II era amid mounting job and wage cuts. Analysts had been predicting the figure would continue climbing.
In a separate report, the Ministry of Internal Affairs and Communications said household spending rose 2.6% from a year earlier despite a 2% drop in average monthly income.
The unexpected results are a welcome development for Japan as it emerges from its worst recession since World War II. But with an uncertain profit outlook, companies remain wary of investing in factories or workers -- a deep wrinkle that could undermine the country's nascent rebound.
The overall labor market is still weak, with the total number of jobless in August rising 32.7% from a year earlier to 3.61 million, the ministry said. Those with employment fell 1.7% to 62.96 million.
The ratio of job offers to job seekers in August matched last month's record low of 0.42, the labor ministry said separately. That means there were 42 jobs available for every 100 job seekers.
The central bank's quarterly "tankan" survey of business sentiment released Thursday showed that while companies are more confident than three months ago, they say they still have too many workers and too much capacity.
Major manufacturers and non-manufacturers plan to reduce their capital expenditures by an average 10.8% this fiscal year through March 2010.
"It doesn't help so much that companies are becoming a bit more optimistic," said Martin Schulz, senior economist at Fujitsu Research Institute in Tokyo. "What they need to see is that we really have original new domestic demand. And this is simply not happening."
The Nikkei financial daily reported this week that major retailer Seven & i Holdings Co is considering shuttering 30 Ito-Yokado Co supermarkets nationwide in an effort to stem losses. And Japan Airlines said last month it plans to cut 6,800 jots by March 2012.
Japan's heavy reliance on exports, which drove economic expansion for five years through 2007, backfired in the aftermath of last year's global financial crisis. Between the third quarter of 2008 and the first quarter of 2009, Japanese exports plunged by the steepest margin among the Organization for Economic Cooperation and Development's 30 member countries.
The downturn resulted in a deep recession, which Japan finally managed to shake off in the April-June quarter. Aggressive emergency spending by governments, particularly China, has helped boost export demand and factory output.
Government data this week showed that industrial output in August increased 1.8% from the previous month.
The persistent caution among companies, however, doesn't bode well for private spending in the months ahead.
Concerns about deflation are also intensifying after prices in Japan tumbled at a record pace in August. Lower prices may seem like a good thing, but deflation can hamper growth by depressing company profits and causing consumers to postpone purchases, leading to production and wage cuts. It can also increase debt burdens.© Wire reports