Company Cost Cuts Raise Jobless Fears in Japan : Labor: New graduates can no longer count on lifetime employment, economists say.

The fear of unemployment is stalking Japan’s young graduates--the would-be corporate warriors who in times past could count on a job for life.

Japan’s cash-strapped companies have been cutting costs by scaling back on new hires, and they will probably continue to do so, making it harder for new graduates to find salaried jobs, economists here say.

“Unemployment, especially among the young, could be the biggest problem for Japan’s economy from now on,” said Johsen Takahashi, a senior economist at Mitsubishi Research Institute.

The unemployment rate for people between 15 and 24 years old climbed to a record high of 7.5% last March, more than double the overall jobless rate, government data show.

Although the overall jobless rate of about 3% is well below the levels of other major nations--such as the United States’ 5.5% and France’s 12%--Tokyo is becoming familiar with the scourge of unemployment.

As the country’s economy slowly emerges from a recession, corporations are faced with an appreciating yen and stagnant domestic sales, prompting them to cut operational and labor costs.

Unlike some American firms, most companies here are reluctant to conduct sudden, drastic layoffs. Instead, they try to trim their work forces by leaving vacancies unfilled or by reducing the number of new staff members, economists said.

“Many firms have no option but to continue to cut fresh hires and wait for natural retirement by senior staff,” said Nobuyuki Saji, a Nikko Research Center economist. “Even if their business gets busy, they might only hire part-timers.”

This threatens to leave Japan’s new graduates out of work.

Three in 10 university students, or 136,000 people, who graduated in March last year failed to secure full-time jobs, and the jobless ratio for new graduates worsened for the third year in a row, according to a survey by the Education Ministry.

Female students have suffered most, as Japanese companies have been cutting the number of recruits for the kind of secretarial and clerical work that is open to women.

For those leaving school or college next March, job offers are predicted to fall by 8.7%, after having dropped 22.4% the year before, the daily Nikkei Shimbun recently reported.

“Companies can no longer afford to hire a bunch of new graduates at the start of every business year and spend huge amounts of money on their in-house training as they have done before,” Mitsubishi’s Takahashi said.

“The moves to restrain recruitment of fresh university graduates may signal a turning point in Japan’s traditional labor system,” he said.

The practices of lifetime employment and seniority-based wages are threatened as many firms rush to reduce recruitment, urge early retirement and introduce flexible wage systems based more on merit than on length of service.

According to a survey by the government’s Economic Planning Agency, about 56% to 64% of firms questioned plan to cut new hires in the next three years. About half said they will cut overtime, and 25% plan to change wage structures, the survey shows.

“Firms may remain reluctant as regards fresh recruitment for years as they cannot expect any speedy decline in the number of workers by natural retirement,” Nikko’s Saji said.

Most leading industries such as automobiles and electronics started to hire a large number of new graduates in the mid-1960s, and it will be some years yet before the workers hired at that time reach retirement age, he said.

Economists are urging broad deregulation to foster new business in businesses such as telecommunications and financial services so that young job seekers can find their places in the work force.