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The manufacturing and construction sectors have been most seriously affected. The weakness of the Japanese labour market is also evident in increased labour force withdrawals. The steady increase in the labour force participation rate experienced since 2004 stalled at around 74% in 2008 and 2009. Youth (15-24 years) labour force participation fell by 350 000 or close to 10% in the two years to July 2009.

The jobs impact of Japan’s fiscal stimulus measures has been particularly strong. This is due to both the relatively large size of the fiscal package, such as tax cuts and public expenditure (4.7% of 2008 GDP, fourth largest after Korea, the United States and Australia among OECD countries), and the relatively high fiscal employment multipliers. According to the OECD Employment Outlook 2009, employment in Japan is likely to decline by between 1.3% and 2.0% less by 2010 than if no fiscal measures had been taken.