Japan’s unemployment rate could be higher than reported

Japan reported an unemployment rate of 2.6% in April, a figure that seems to be too good to be true, and it might just be.

The COVID-19 pandemic has seen jobless rates for countries around the world plunging to historic depths, with the US witnessing a 14.7% unemployment rate last month.

Japan’s figure of 2.6% is impressive yet raises eyebrows at the same time, given that its economy has also been hit by the pandemic.

According to Bloomberg, the Asian giant’s unemployment rate could go as high as 11.5%, if it includes an extra 4.2 million people who are technically still attached to their employers but aren’t actually working and may not be getting full paychecks. And that does not even include 940,000 workers who left the workforce in April.

“The reality is that you shouldn’t be looking at the jobless rate” to get a gauge of what’s really happening in Japan’s labor market, said economist Takuya Hoshino at Dai-ichi Life Research Institute.

Hoshino added that the official employment rate could jump by as much as 6% if companies go out of business and their furloughed workers end up with no jobs to return to. This is a big risk because labor-intensive industries, like restaurants and hotels, have been hit so hard by the crisis.

“During the great financial crisis, it was the manufacturers that took the major hit. Given the labor-heavy nature of the service industries being hit now, the labor market could get a lot worse,” he said.