Japan reports factory output, unemployment rose in May

TOKYO – Japan's factory output rose in May from a year earlier and the number of jobs per job seekers climbed to a 43-year high, reflecting labor shortages as stronger exports to the rest of Asia boost demand.

May's 6.8 percent year-on-year increase in factory output reported Friday was the seventh straight month of gains, though production fell 3.3 percent from the month before, partly due to the "Golden Week" national holiday.

Despite the high ratio of jobs to job seekers, at 1.49 to 1 the highest since February 1974, government said the unemployment rate rose to 3.1 percent from 2.8 percent in April as workers quit to seek new jobs in a labor-short market.

The government revised its latest estimate for real annual growth in the January-March quarter to 1 percent from a previous estimate of 2.2 percent. A key factor constraining potential demand is wages, which have remained relatively flat.

Labor shortages have been worsening as the working age population shrinks, but companies have held back on increasing wages of permanent staff, though hourly pay for part-timers and contract workers has increased. That has complicated efforts to spur inflation, the main growth strategy adopted by Prime Minister Shinzo Abe's government and the central bank.

Higher oil prices pushed the inflation rate in May to 0.4 percent, but excluding both volatile food and energy costs inflation remained flat, the Ministry of Internal Affairs and Communications reported.

Other data showed household spending edging 0.1 percent lower in May from a year earlier, while household incomes dropped 1.7 percent from the year before.