The Japanese economy released a series of fundamentals today showing that deteriorations in the labor market eased as jobless rate declined, while household spending continued to improve. On the other hand, retail trade declined and deflation risks continued to threaten the world’s second largest economy.

Japan’s jobless rate declined to 5.1% in October compared with 5.3% in September, and the reading came opposing analyst’s forecasts of an incline to 5.4%. The job to applicant ratio inclined to 0.44 from a previous 0.43 and it came inline with anticipations.

However, the improvements witnessed in the labor market is indicating the worst have passes and the Japanese labor market is recovering from the sever impact of the worst financial crisis since the great depression.

On the other hand, unemployment rate remains high even after three straight declines and that can be proved through the proportion of college students with job offers as it tumbled 7.4 percentage points from a year earlier to reach 62.4% the steepest decline since the survey began in 1996. Yet, the government said in today’s report that the employment environment for fresh graduates is “extremely sever”, wroth mentioning that the government pledged to provide 100,000 jobs by the fiscal year ending in March.

After we witnessed the jobless rate declining, it was expected to see household spending rising. Household spending rose 1.6% in October from a year earlier following an incline by 1.0% and it came higher than the expected 0.7%.

Despite household spending rose, still households pressured by high unemployment that still above the levels witnessed before the beginning of the crisis forcing consumers to cut spending and delay purchases. Monthly retail trade declined 0.9% in October following an incline by 0.9%, while on the yearly record retail trade dropped 0.9% following a revised decline by 1.3%, and forecasts referred to 1.6%.

Today’s fundamentals showed the deflation risks remain threatening the world’s second largest economy, having consumer prices declining 2.5% in October from a year ago. Consumer prices excluding fresh food and energy dropped 1.1% from a prior decline by 1.0%.

The Bank of Japan expected in its monthly report that the drop in consumer prices will moderate on the medium term as energy and raw materials prices are recovering along with rising world demand. Recovery is taking place in major economies leading to increasing demand especially from fast growing economies like China which expanded 8.9% in the third quarter.