(Updates to show Noda was elected premier today, in third paragraph.)
Aug. 30 (Bloomberg) -- Japan’s jobless rate rose for a second month and retail sales dropped, underscoring the challenge for incoming Prime Minister Yoshihiko Noda in securing Japan’s recovery from the March 11 earthquake.
The unemployment rate rose to 4.7 percent in July as payrolls fell by 40,000 from a month earlier, the statistics bureau said today in Tokyo. Retail sales slid a seasonally adjusted 0.3 percent from June, a Trade Ministry report showed.
Noda, who was elected premier by the lower house of parliament today, inherits a recovery under threat from an advancing yen and a global slowdown. A weakening economy will complicate his task of funding the next reconstruction package, according to economist Yoshimasa Maruyama.
“Today’s reports show Japan’s recovery is leveling off in the middle of the post-earthquake rebound,” said Maruyama, a senior economist at Itochu Corp. in Tokyo. “Noda wants to raise taxes next fiscal year but that may have to be postponed. The economy won’t be strong enough.”
Noda is the sixth prime minister in five years. As finance minister, he advocated raising taxes to fund quake relief. The previous two packages totaled 6 trillion yen ($78 billion), or about a third of the 16.9 trillion yen in damages from the disaster, according to Cabinet Office estimates.
The median forecast of 28 economists surveyed by Bloomberg was for the jobless rate to remain unchanged at 4.6 percent. Retail sales advanced 0.7 percent in July from a year earlier, today’s report showed. That was less than the 1.3 percent gain that analysts expected.
“The new government needs to undertake reconstruction measures as soon as possible to support the economy, especially when overseas demand is slowing,” said Azusa Kato, an economist at BNP Paribas in Tokyo. “Companies will have little choice but to stop hiring or cut jobs” if the recovery doesn’t pick up, she said.
The government last week unveiled a $100 billion program to aid exporters and spur overseas purchases as the yen’s 5 percent advance against the dollar in three months threatens exporters’ sales and profits. Japan’s currency traded at 76.86 per dollar at 10:17 a.m. in Tokyo.
Honda Motor Co., Japan’s third-largest carmaker, has said it may revise its full-year profit forecast, depending on U.S. market turmoil. Chief Financial Officer Fumihiko Ike told reporters Aug. 9 that he’s concerned the yen may strengthen to the low 70s against the dollar, further hurting the company.
Japan’s gross domestic product shrank for a third consecutive quarter in the three months ended June 30 after the earthquake damaged exporters’ factories. GDP will probably drop 0.2 percent this year, marking “a full year recession,” David Rea, a London-based economist at Capital Economics Ltd. said in a report Aug. 29.
--With assistance from Toru Fujioka, Keiko Ujikane and Theresa Barraclough in Tokyo. Editors: Lily Nonomiya, Paul Panckhurst
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