Good move: An electronic stock board displays the Nikkei Stock Average outside a securities firm in Tokyo. Japan’s latest data comes as welcome news for the BoJ after it raised interest rates and unveiled a roadmap for quantitative tightening last week. — Bloomberg
TOKYO: Japanese workers’ real wages rose for the first time in more than two years, brightening the prospects for a recovery in consumption and the emergence of a positive growth cycle long sought by the Bank of Japan (BoJ).
Real cash earnings for workers climbed 1.1% in June from a year earlier, turning positive for the first time since March of 2022, the Labour Ministry said yesterday.
Economists had expected the reading to remain negative at minus 0.9%. Nominal wages grew 4.5%, far surpassing the consensus estimate of a 2.4% rise.
A more stable measure of the trend that avoids sampling problems and excludes bonuses and overtime showed wages for full-time workers increasing by 2.7%, while base salaries gained 2.3%, the most in nearly 30 years.
Yesterday’s data will come as welcome news for the BoJ after it raised interest rates and unveiled a roadmap for quantitative tightening last week.
The central bank is looking for evidence that wage gains will fuel spending, spurring demand-led price gains in a virtuous cycle.
In explaining last week’s rate hike, governor Kazuo Ueda said that inflation has been on track, driven by positive factors including higher wages feeding into service prices.
The June figures were likely exaggerated by strong bonuses, according to Taro Saito, head of economic research at NLI Research Institute.
“I believe that real wages will not settle in positive growth until the fall,” Saito said.
“Consumption is currently sluggish, but I expect it to gradually pick up because wage hikes are spreading and the employment and income environment is improving.”
A separate report showed that household spending fell in June, with real outlays adjusted for inflation sliding 1.4% from a year earlier.
Economists had forecast a 0.8% decline. Spending edged 0.1% higher from May.
The nation’s largest umbrella group for unions secured wage increases of more than 5% for its constituents in this year’s annual negotiations, the largest gains in more than 30 years.
While that agreement only directly affected workers at large companies, the nation’s chronic labour shortage means employers at smaller firms are also having to raise wages as they compete for personnel.
The BoJ has said in the past that about 80% of wage increases agreed for a new fiscal year are reflected in data by June.
Taro Kimura, economist, said: “In a vacuum, the wage report would have given the BoJ more confidence to go ahead with another rate hike in coming months.
“But recent market volatility could cause the BoJ to think twice on its rate strategy, even if it is growing more convinced that the wage-price cycle is spinning in a direction that supports sustainable 2% inflation.”
Temporary workers are also seeing higher remuneration, with wages for part-time workers rising 4.9% in June.
The Labour Ministry’s panel last month called for raising the minimum hourly salaries for the current financial year by a record 5%.
In the June data, “special compensation” jumped 7.6% as workers received summer bonuses. — Bloomberg
