By Toru Fujioka Oct. 30 (Bloomberg) -- Japan’s jobless rate unexpectedly dropped to a four-month low in September, adding to signs that a recovery in the world’s second-largest economy is spreading to consumers. The unemployment rate fell to 5.3 percent from 5.5 percent in August, the statistics bureau said today in Tokyo. The median estimate of 29 economists surveyed by Bloomberg was for an increase to 5.6 percent and only one person predicted a drop. Stocks rose, building on a global rally spurred by a report that showed the U.S. economy expanded for the first time in a year. The Bank of Japan will probably consider allowing its corporate-debt purchases to end in December at a meeting today, as central banks around the world start phasing out emergency measures taken at the height of the financial crisis. “These numbers are much stronger than expected,” said Masamichi Adachi, senior economist at JPMorgan Chase & Co. in Tokyo. “Employers who earlier thought they couldn’t survive without cutting more jobs are now thinking that those cuts may not be that necessary. People aren’t fully relieved, but the panic is over.” The yen traded at 91.31 per dollar at 11:22 a.m. in Tokyo from 91.47 before the report was published. The Nikkei 225 Stock Average advanced 1.3 percent to 10,015.28. Job Prospects Improve A separate report showed the job-to-applicant ratio, a leading indicator of employment trends, improved for the first time in more than two years. The ratio rose to 0.43 last month from a record low of 0.42 in August, meaning there are 43 jobs for 100 job seekers. Household spending climbed 1 percent from a year earlier, the statistics bureau said. The figures added to evidence that the recovery from Japan’s worst postwar recession may be sustained. Data released earlier this week showed industrial production and retail sales in September exceeded economists’ expectations. Manufacturers increased output for a seventh month, extending the longest stretch of gains in 12 years. Honda Motor Co., Japan’s second-largest carmaker, almost tripled its full- year profit forecast as government stimulus measures boosted demand, the company said this week. “Production is slowly increasing. That means that the job market is probably not going to get much worse,” said Toru Shimano, head of economic research at Okasan Securities Co. in Tokyo. “Things are less bleak than they were, but it’s still too early for optimism.” Global Pickup The economy added jobs for a second month on a seasonally adjusted basis. Manufacturers also cut jobs at a slower pace, according to year-on-year breakdowns provided by the government. Japan’s largest overseas markets are showing signs of picking up. The U.S. economy expanded at an annual 3.5 percent rate last quarter after a yearlong contraction, and growth in China accelerated to 8.9 percent, the fastest pace in a year. Still, renewed demand has yet to spur hiring at all companies. Nomura Holdings Inc., Mitsubishi UFJ Financial Group Inc. and their biggest rivals plan to cut recruitment of university graduates in Japan next year. Nomura, Japan’s biggest brokerage, plans to hire 500 graduates, compared with 650 a year earlier. Mitsubishi UFJ’s banking unit will take in 650 graduates, down from 1,500, the company said. “We’re seeing a little bit of the light at the end of the tunnel,” said Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo. Nevertheless, “the recovery is very, very weak and companies are still saying they have far too many workers, so we shouldn’t get ahead of ourselves.” Wage Subsidies Shinke said a government program providing wage subsidies is also supporting the job market. He said firms have applied for aid on behalf of about 2 million workers. Deflation is also weighing on paychecks, which may compel consumers to cut spending in coming months. Core consumer prices, which exclude fresh food, tumbled 2.3 percent from a year earlier, the statistics bureau said today. “Japan’s economy continues to show signs of recovering on the whole, but we need to be mindful about the risk of slipping into deflation,” Deputy Prime Minister Naoto Kan told reporters after today’s figures were published. The Bank of Japan will probably forecast today that consumer prices will keep falling through fiscal 2011, signaling there will be little chance to raise interest rates for a year at least, economists said. The board members are likely to stress they will have to keep borrowing costs at 0.1 percent to bolster economic growth. “The outlook report will likely warn that risks to the economy are still to the downside and core prices will remain below zero,” said Izuru Kato, chief market economist at Totan Research Co. in Tokyo. The report will help to quash any investor expectations that rates may rise soon, he said.

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