u* in Japan

[pmichaillat]

Here is an analysis of u* = √uv in Japan.

@YoshiShono can tell us exactly what it says, since it is in Japanese. But from figures 2 and 3, it does seem that the Japanese labor market has been inefficiently tight in the past few years (roughly since 2015). The labor market was also clearly too tight in the late 1960s.

[YoshiShono]

Sure! Let me start with the data used here. The data is from the Ministry of Internal Affairs and Communications (MIC) and the Ministry of Health, Labour and Welfare (MHLW). The MIC's data corresponds to the CPS in the U.S., while the MHLW offers the data of job-openings. The data is publicly available. Note that the data of job openings from the MHLW depends on its "Hello Works", which are the public employment security offices. This means that the number of job openings are not universal since firms can recruit without using the official agency. Nontheless, the data from the MHLW is valuable to see the dynamics of the labor market. Actually, a lot of economists use the information.

In 「図表１(Figure1)」,
①: Jobs-to-applicants ratio, which is derived by ②/③. This is (有効求人率) in Figure 2.
②: This data is from the MHLW. It is Monthly active job openings.
③: This data is from the MHLW. It is Monthly active applications.
④: This data is from the MIC. The number of labor force participation.
⑤: This data is from the MIC. The number of employment.
⑥: This data is from the MIC. The number of unemployment.
⑦: Unemployment rate. This is (完全失業率) in Figure 2.
⑧: "job openings ratio" (②/④)
⑨: √⑦×⑧ (so, it is u* = √uv). They call this number as 均衡失業率 (equilibrium unemployment rate) in Figure 2.
⑩: ⑦-⑨ (They call 失業ギャップ "unemployment gap")

「図表３(Figure3)」shows the dynamics of ⑩ (u-u*). The following is the authors' own view in this report for Figure3.

Japan's labor market remained near zero from 1965 to about 1995. However, due to a lack of macroeconomic stabilization policies, from the mid-1990s until around 2015, the labor market supply and demand have been almost consistently loose, which coincided with a period of deflation. In addition, after 2015, the labor market remained almost continuously tight, except for around 2020, when COVID-19 affected the labor market. During this period, the improvement in the number of job openings and the job vacancy rate was likely due to the yen's depreciation and rising stock prices following the large-scale monetary easing that began in 2013, the resulting improvement in corporate earnings, and the resulting increased willingness of firms to hire.

[rongjinz]

Thank you for sharing!

[pmichaillat]

Thank you so much for the translation! It is very helpful to know where the data come from and understand the author’s interpretation of the results.

[DizhiWang]

Thank you so much!!!!!