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Declining Labor Force

-Need for Reduction in the Equilibrium Unemployment Rate


Japan’s unemployment rate (seasonally adjusted) stood at 3.3% in April 2015, the lowest level since April 1988, and it appears to be approaching the equilibrium unemployment rate. The “Diffusion index of ‘Excessive employment,’ minus ‘Insufficient employment’ continues to be negative (implying an excess of “insufficient” responses), and, in some cases, there are acute shortages of labor. Since labor market conditions are on an improving trend along with recovery in the economy, at present, the supply/demand balance for labor is tightening. This may rekindle concerns expressed in the mid-2000s that the shortage of labor will cause supply constraints.