Japan’s unemployment rate hike amid the COVID-19 pandemic – why was it so mild?

ABSTRACT

This essay is a flash report on the impact of the COVID-19 pandemic on Japan’s labour market in the fiscal year 2020 wherein Japan’s unemployment rate increase was much milder than in other G7 countries. How was such a favourable outcome achieved? To answer this question, this essay analyses primary statistics to show that the main contributing factors were the swift cut of labour hours and the rapid increase in coronavirus-related paid leave. The latter factor is due primarily to an expanded labour policy measure. Generous policy measures to support corporate finance were also effective in maintaining general financial stability and preventing an increase in failures in the fiscal year 2020.

KEYWORDS:

• The COVID-19 pandemic
• labour policy
• coronavirus paid leave
• unemployment rate
• financial stability policy

JEL CLASSIFICATION:

• J80
• G28
• H20

Highlights

• The impact of the COVID-19 pandemic on Japan’s labour market is analysed.

• Japan’s unemployment rate increased much less than in other G7 countries.

• A major contributing factor was the rapidly increased use of coronavirus-related paid leave.

• This factor is largely attributable to an extended measure in labour policy.

• Generous policy measures to support corporate finance were helpful too.

Acknowledgments

The authors declare that they discharge their ethical responsibilities applicable to Applied Economics Letters, and that they have no conflict of interest. The authors are grateful to Mark P. Taylor (Editor of this journal) and this essay’s anonymous referee. The views in the essay are those of the authors alone and do not reflect those of their affiliations. Any possible errors in the essay are the exclusive responsibility of the authors.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Correction Statement

This article has been republished with minor changes. These changes do not impact the academic content of the article.

Notes

¹ The assumption is expedient but not too unrealistic because Japan’s labour market was on a gradually tightening trend for the seven years. For example, the annual unemployment rates, or the averages of monthly unemployment rates, were 4.03% in 2013, 3.59% in 2014, 3.38% in 2015, 3.12% in 2016, 2.81% in 2017, 2.44% in 2018, and 2.35% in 2019.