JAPANESE UNEMPLOYMENT is rising. The rate last month hit 3.2 percent of the labor force, very low by American standards (let alone European), but the highest in a generation for Japan. Meanwhile, unemployment is coming down here in the United States. It was 6.1 percent last month, one percentage point lower than a year ago.
The reason for the increase in Japan is simply the high exchange rate of the yen. It's cutting into exports, and Japan has an export-driven economy. Measured in dollars, Japanese exports are still increasing -- but that's because the dollar's exchange rate is down. Measured in volume, Japan's exports have been falling since March of last year. So far the decline has been small, but it's sufficient to affect jobs in Japanese manufacturing. In the United States, conversely, exports have begun to rise.
Japan has been slow to react to the fall of the dollar and the coming drop in the flow of Japanese goods into the American market. Rising unemployment will strengthen the case for a sharper swing in Japanese economic policy. The government there moved this spring to push up internal demand and reduce the country's excessive dependence on exports as a source of growth. But the stimulus so far has been modest, compared with the fall in foreign sales that now seems inevitable.
Here in the United States, policy faces the opposite question. With foreign sales going up, it's reasonable to expect employment to go up as well. What will that do to wages and prices? The conventional view is that there's no danger of any very significant rise in inflation. But at some point a falling unemployment rate tightens competition for labor to a point at which wages begin to accelerate. No one knows precisely where that point lies, but the consensus among economists puts it at an unemployment rate somewhere between 5 and 7 percent. At the present 6.1 percent, unemployment is now close to the midpoint of that range. That's a powerful reason for President Reagan to work together with Congress on a substantial cut in next year's budget deficit.
Just as Japan has to raise internal demand as its exports fall, the United States has to reduce internal demand -- generated by that huge budget deficit -- as its exports begin to rise. The two most powerful economies in the world are now going through a demanding passage in which, to avoid disaster, speed and agility will be crucial. But both, so far, are reacting only slowly and reluctantly