The Japanese labour market remains very tight: this should continue to exert upward pressure on wage growth and JGB yields. Employment rebounded 250k in August to a record high of 67.91mn, despite the ongoing decline in the working age population. Indeed, the labour market participation rate rose to a new secular high of 63.36% in August, the highest since June 1998. The female labour force participation rate jumped to a fresh record of 55.72%.
The new job offers-to-applicants ratio moved higher in August, as new job offers edged up, and new applicants fell to the lowest since April 2020, underscoring the extent of labour shortages. The unemployment rate fell back to 2.5% in August, after rising briefly to 2.7% in July, and could fall to new secular lows in Q4 of this year, according to the employment index from the September Tankan survey.
Indeed, the latest Tankan survey was upbeat once again: the business conditions index for all enterprises, and all industries, climbed to 14 in September, up from 12 in the June survey, and well up on the forecast from June (10). Business conditions in the services sector were markedly improved. The non-manufacturing business conditions index climbed from 19 in June to 20 in September (well above the forecast of 13). Corporate profits remain at record highs. Land prices are rising at the fastest annual rate since 1991.
