On Recent Studies of Unemployment in Japan

The introduction of UV analysis and labor flow analysis is perhaps the most prominent feature of the recent discussion of unemployment in Japan. The former, which is considered to be an effective tool for estimating so-called frictional unemployment, is frequently used for judging the current employment situation. It is well known that the unemployment rate in Japan is not as high as in European and North American countries; however, opinions vary as to how to evaluate this low Japanese rate. Some maintain that the actual situation is close to full employment, interpreting the rising unemployment rate as nothing more than a longitudinal increase in frictional unemployment. Those who oppose this view regard the worsening of the employment situation in Japan as a matter that cannot be neglected. For example, the Labor White Paper of 1983 states that "the recent rise in unemployment is largely due to the decrease in labor demand that has accompanied the economic slowdown" (p. 30). Thus, different conclusions have followed, even though the same UV analysis is used. One objective of this paper is to find the source of this difference, which I believe should be traced to the premises of UV analysis.