Unemployment in Japan above 6% in August

Since the beginning of 2009, unemployment rate in Japan has been on rise. The Statistical Bureau of Japan has just announced a severe increase in (seasonally adjusted) unemployment rate up to 5.2% in May. There was only 4.1% in December 2008.

We have predicted that effect in our early paper [1] and confirmed the prediction in the detailed study of unemployment in Japan [2]. The most recent estimate of the linear link between unemployment rate and the change in labor force level gave the following relationship:

UE(t)= -1.5dLF(t)/LF(t) +0.045 (1)

where UE is the unemployment rate at time t, LF is the level of labor force at the same time. Thus, there is no time delay between the change in the LF and UE, as it observed in many developed countries [3,4].

As with any quantitative prediction of future time series, one can check and validate the underlying relationship using new data. Figure 1 compares the measured unemployment rate in Japan to that predicted from (1). Relevant labor force estimates are also retrieved from the Statistical Bureau's table.

Between 1999 and 2008, the prediction is excellent considering the accuracy of both unemployment and labor force measurements. The deviation between the curves observed in 2008 is the largest. However, it does not influence the accuracy of the 2009 prediction, which is definitely outstanding in terms of dynamic resolution. The dramatic increase in unemployment rate is well predicted by relevant fall in the level of labor force; the slope in (1) is negative. Because of the absence of time delay between these two variables, it is difficult to distinguish between action and reaction. Our previous investigations indicate that the change in labor force in the primary source of the change in unemployment and inflation [3,4].

Figure 1 demonstrates that the rise in unemployment is not finished yet and it may reach 6% in August 2009. Since the labor force estimates are contemporary to the unemployment one, we can not stretch them into 2010. However, labor force projections for Japan show that the unemployment will approach 5% in the long run, as depicted in Figure 2 borrowed from [2].

Figure 1. Comparison of observed and predicted unemployment rate in Japan.

Figure 2. Unemployment rate projection for Japan between 2010 and 2050 [2].


[1] Kitov, I., (2006). The Japanese economy, MPRA Paper 2737, University Library of Munich, Germany, http://ideas.repec.org/p/pra/mprapa/2737.html

[2] Kitov, I., (2007). Exact prediction of inflation and unemployment in Japan, MPRA Paper 5464, University Library of Munich, Germany,

[3] Kitov, I., (2007). Exact prediction of inflation and unemployment in Germany, MPRA Paper 5088, University Library of Munich, Germany,

[4] Kitov, I., Kitov, O., (2009). Unemployment and inflation in Western Europe: solution by the boundary element method, MPRA Paper 14341, University Library of Munich, Germany, http://mpra.ub.uni-muenchen.de/14341/01/MPRA_paper_14341.pdf

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