Japan labour demand strengthens, positive sign for spending

Pedestrians walk at a scramble crossing at Shibuya shopping district in Tokyo in this Feb 28, 2014 file photograph. The availability of jobs in Japan held at its highest in more than two decades, official data showed, while news of rising househ
Pedestrians walk at a scramble crossing at Shibuya shopping district in Tokyo in this Feb 28, 2014 file photograph. The availability of jobs in Japan held at its highest in more than two decades, official data showed, while news of rising household spending suggested consumers were shrugging off April's sales tax hike. -- PHOTO: REUTERS

TOKYO (Reuters) - The availability of jobs in Japan held at its highest in more than two decades, official data showed, while news of rising household spending suggested consumers were shrugging off April's sales tax hike.

Household spending rose 1.5 per cent in June from the previous month in seasonally adjusted terms, falling short of economists' median estimate of a 2.2 per cent increase - reversing the contractions seen in April and May.

The jobless rate unexpectedly rose to 3.7 per cent in June from 3.5 per cent in May, but labour shortages in construction and retail suggest the jobless rate is not likely to rise sharply.

The jobs-to-applicants ratio rose to 1.10 in June from 1.09 in the previous month, data from the labour ministry showed on Tuesday, matching a high last seen in June 1992.

Household spending showed signs that consumption is gradually recovering after a sales tax increase in April, supporting the Bank of Japan's argument that domestic demand is strong enough to drive economic growth and push inflation to its 2 per cent price target.

On an annual basis, Japanese household spending fell 3.0 per cent in June from a year ago, less than the median market forecast for a 3.8 per cent annual decline and well below the 8.0 per cent decline in the year to June.

Retail sales fell 0.6 per cent in June from a year ago, more than the median estimate for a 0.5 per cent annual decline and faster than a 0.4 per cent decline in the year to May.

The government raised the national sales tax to 8 per cent from 5 per cent on April 1 to pay for rising welfare costs.