Japan's jobless rate fell unexpectedly for the first time in seven months in August while consumer spending rose, boosting hopes the economy is healing after its worst slump in decades.
Massive stimulus spending and rebounding exports are nursing the world's number two economy back to health, but there is a risk that the recovery may stall at some point as the impact of stimulus measures fade, analysts said.
The jobless rate fell to 5.5% in August, from a record high of 5.7% in July, the government said. The improvement surprised markets, which had anticipated a figure of 5.8%.
However, analysts warned that the unemployment rate will stay high for a country that once boasted a job-for-life culture.
The number of people out of work stood at 3.61 million in August, up 890,000 from the same month of 2008 - the 10th year-on-year increase in a row.
Household spending rose by 2.6% in August from a year earlier, reversing a drop of 2% in July, the government said.
While the job market slump appears to be easing slightly, conditions remain tough for people looking for work, with only 42 offers for every 100 jobseekers in August, matching a record low set in July.
There are concerns that unemployment could worsen again later this year as firms continue to restructure and as the effect of stimulus measures such as government incentives to buy cars in Japan and overseas begin to wear off.
Many Japanese companies, particularly exporters, moved swiftly to cut jobs and production in response to a slump in demand caused by the global economic downturn.
But some companies are now starting to hire again after the economy grew in April-June for the first time in five quarters.
Toyota said this week that it would take on 1,600 temporary workers because sales were recovering more strongly than expected.
