Japanese workers’ real wages fell for the 11th straight month despite a government push for higher pay, highlighting the challenge awaiting incoming Bank of Japan Governor Kazuo Ueda.
(Bloomberg) — Japanese workers’ real wages fell for the 11th straight month despite a government push for higher pay, highlighting the challenge awaiting incoming Bank of Japan Governor Kazuo Ueda.
Real cash earnings for Japan’s workers dropped 2.6% from a year earlier in February, matching economists’ forecast, the labor ministry reported Friday. The data is watched closely because many expect stronger pay to prompt the BOJ, under its new chief, to consider ending its ultra-easy policy.
This weekend Ueda takes over the thorny task of figuring out what to do with a decade’s worth of massive stimulus conducted under outgoing Governor Haruhiko Kuroda. What happens to wages has been considered a key part of the puzzle, as Kuroda and Ueda have both argued that solid pay is a requirement for sustainable inflation.
“The BOJ will probably take a little more time before it reviews negative interest rates,” said Koya Miyamae, senior economist at SMBC Nikko Securities.
The wage data also comes on the heels of figures that suggest inflation has peaked out after a stimulus package from Prime Minister Fumio Kishida helped to lower energy bills. Price gains, rather than accelerating, now appear to be spreading across a wide range of items beyond energy.
Meanwhile, nominal cash earnings gained for the 14th month in February, climbing 1.1% from the previous year. That likely reflects both sharp gains in prices and some recovery in economic activity, which has led to an increase in overtime pay. Still, many companies appear to lack the confidence to hand out bigger and more permanent pay hikes.
Separate data showed that Japan’s households increased spending compared to the previous year for the first time in four months in February, although the 1.6% gain was weaker than economists’ expectations. Spending fell by 2.4% compared to the month before.
Kishida has positioned higher wages at the center of his so-called New Capitalism drive to broaden income distribution. Amid the government push and inflation at a four-decade high, Japan’s main labor unions won their biggest wage hike in three decades in recent annual spring wage talks. Key unions and their employers reached a preliminary agreement to raise overall wages by 3.8% — the most since 1993.
Workers at smaller businesses and part-time employees also saw similar levels of wage gains in their annual spring pay negotiations, according to the latest tally from Rengo, Japan’s biggest labor union. “These results suggest there’s progress in efforts to correct the disparity by employment status,” Tomoko Yoshino, the union leader, said at a press briefing on Wednesday.
Some economists expect the trend in real wages to turn positive as early as the second half of this year, if nominal wage growth continues while inflation decelerates further.
“From April onward wages should start really growing on a nominal basis,” said economist Yuichi Kodama at Meiji Yasuda Research Institute. “Inflation should calm down toward the second half of the year, so it’s possible real wages will also start getting stably into positive territory then.”
–With assistance from Keiko Ujikane.
(Updates with more details on data, economist comments)
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