Japan Jobs Picture, Confidence Falter, Central Bank Says

Employment conditions in Japan are worsening and consumer confidence--essential to Japan’s economic recovery--is deteriorating further, the central bank said in a report Thursday.

In another bleak assessment of the economy, the Bank of Japan said in its monthly report that the ratio of job offers to seekers has dropped to a historical low and that incomes are falling as well.

The Bank of Japan also said that downward pressure on prices is continuing, raising fears of a deflationary spiral. Falling prices cut into company earnings, hurting income and employment conditions and dampening consumer confidence further.

“Consumer sentiment seems to be turning cautious again,” the bank said.

The central bank also cast doubt on the effectiveness of the government’s $112-billion economic stimulus package announced in April, which included public works spending and special income tax cuts.

The bank said declines in corporate and housing investment have led to “substantial cutbacks” in industrial output but that inventories have fallen only slightly.

Corporate capital investment during the April-June quarter fell by a large margin after suffering a 5.1% drop in the January-March quarter.