Japan's once enviable jobless rate will soar to double-digit levels if—and the warning is a big one—firms opt for drastic Western-style layoffs to boost profits. While Japan's life-time employment system is visibly unravelling, many economists still doubt whether a scenario of soaring joblessness will occur, given that economic incentives to slash payrolls clash with social and political pressures to save jobs. A kinder, gentler approach to restructuring would soften the social instability many fear would result from doubling the jobless rate, already at a record high.
Critics believe it would also cap gains in profit margins and stifle economic vitality, especially in the absence of bold steps to open the door to new growth, industries. Some economists believe different methods of counting mean Japan's jobless rate is already close to 7 per cent by United States standards, not that far from the 7.8 per cent peak hit in the US in 1992 when it began to emerge from a two-year slump.