Japanese look into unemployment abyss

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WHAT is Japan's unemployment rate? According to the official figures, the jobless rate in December had risen to 2.4 per cent, from 2.3 per cent a month previously. Not bad for a recession, one might think, compared to the ravages of unemployment in Europe.

'Rubbish,' said a senior Japanese banker recently. 'In fact our unemployment rate is probably just as high as yours in the UK - it is just hidden, because it is in- house unemployment.'

Of all the myths about Japan, the idea of a nation-wide network of highly efficient, ruthlessly motivated and super-productive workers with jobs for life is one of the most enduring - and the most misleading. It is true that some sectors of the manufacturing industry - cars, electronics and industrial machinery, for example - have attained levels of efficiency that no other country can match. But other, older manufacturers, as well as most of the service sector, are monumentally inefficient and over-staffed.

Try the dollars 100-bill test. Walk into any major city bank in Tokyo and ask to change USdollars 100 into Japanese yen. A fairly simple transaction, to be completed in two or three minutes? Not in the world's second largest economy that last year notched up a trade surplus of USdollars 132bn ( pounds 91bn). The whole transaction might take 10 or 15 minutes, assuming the bank is empty, and will occupy up to four employees of the bank - from the junior who welcomes you and directs you to the 'foreign exchange' sign, to the clerk who takes the bill and gives you the necessary forms, to the clerk's boss who nods the form through, to the cashier who counts out the yen - all for the meagre 1 per cent commission the bank will earn on your dollars 100-bill.

This is what the banker was referring to by 'in-house unemployment'. For years, but particularly during the bubble economy of the late 1980s, Japanese firms hired graduates regardless of the amount of work they had for them to do. The common wisdom was that the country's declining birthrate was going to lead to a shortage of workers, so firms should amass as many bodies as possible. The fact that many would spend large portions of their working day watching television, reading adult comics or waiting for their boss to approve something before they could continue their task, was regarded as unimportant as long as revenues continued to rise.

But now company revenues have stopped rising, and in many cases are declining. Executives are looking with horror at the huge drag on profits exercised by fixed costs, the highest of which are wage bills. They have by now used up all the easy ways of reducing costs, by cutting expense accounts, slashing bonuses, and refusing to pay workers for overtime. They have transferred as many of their internally redundant workers to subsidiaries and affiliates as they can. Some workers are not working a full week, and others are even being paid to stay at home. Now comes the hard part, that sends a shudder down any Japanese manager's spine - layoffs.

More and more companies are announcing early retirement packages, cutting back on recruitment, laying off temporary workers. Over the past week 4,000 jobs have been cut by Kodak, Minolta and the electronics firm, Omron.

Unemployment is particularly horrifying in Japan because you are what you do - people are more closely identified with their company and job than in the West. It is common in Japan, for example, to hear someone introducing themselves as 'Tanaka of Toyota' or 'Yamaguchi of Sony', almost as if the company's name had become a second surname.

From the government's point of view, unemployment does not make sense for the economy as a whole. The more people in work earning a salary, the more money is spent on consumer goods, and the better the economy overall - or so the thinking goes. Company profitability has never rated high on the list of economic priorities.

So this week the Labour Ministry has appealed to companies to keep layoffs to a minimum, and not to cancel plans to hire new recruits this year. 'Labour adjustment by such means will create great worries over employment in the whole of society,' said Kunihiko Saito, head of the ministry's employment security bureau, to a group of business leaders. 'We want you to do your utmost to keep workers employed.'

Already Pioneer has cancelled a plan forcibly to retire 35 managers in their fifties, which was announced last December. But with no improvement in the economy in sight, companies increasingly are being squeezed by their penalising wage bills on one side, and the social and governmental pressures against layoffs on the other side. Inexorably, the unemployment figures are going to rise.