Base salaries increased by 2.7% in November from a year ago to drive up nominal wages by 3%. — Bloomberg
TOKYO: Japanese workers’ base salaries grew the most in 32 years, offering potential support for the central bank to raise rates this month if other data back up the thesis that a positive economic cycle is strengthening.
Base salaries increased by 2.7% in November from a year ago to drive up nominal wages by 3%, the labour ministry reported yesterday.
Economists had expected nominal pay to rise 2.7%.
A more stable measure of wage trends watched by the central bank that avoids sampling problems and excludes bonuses and overtime showed wages for full-time workers gained 2.8%, remaining at or above 2% for 15 months.
The yen strengthened slightly against the dollar following the report, gaining up to 158.10.
In a more discouraging sign, real cash earnings dropped 0.3% from a year earlier, extending the streak of declines to four months.
Stagnation in real wages was partly driven by inflation outpacing pay growth, as price gains strengthened in November after the government halted subsidies for utility bills, pushing up energy costs.
The steady wage trend may refuel speculation over a near-term rate hike from the Bank of Japan (BoJ), including in the upcoming policy decision meeting this month.
Since BoJ governor Kazuo Ueda gave dovish comments at the post-December meeting press conference, market participants’ views have tilted toward expecting the next policy change to come later.
“Today’s data doesn’t necessarily indicate the wage trend has improved dramatically,” said Meiji Yasuda Research Institute economist Yuya Kikkawa.
“Still, the BoJ could hike if there is additional positive information, for example from branch managers’ hearings.”
Last month Ueda said that he would like to see more data before making further tightening steps, including signs of sustained wage growth.
That has drawn attention to the latest data on pay, as the country heads toward the annual spring wage negotiations.
Economist Taro Kimura said: “A surprisingly strong rise in labour cash earnings in November will likely increase the BoJ’s confidence that wages are bolstering consumer price trends toward securing its 2% target.”
Last year the BoJ conducted its first rate hike in 17 years in March, shortly after the nation’s largest trade union federation Rengo announced that its members had secured the highest wage increases in over three decades.
This year, Rengo plans to release its initial tally on March 14, five days before the BoJ’s policy meeting results for that month.
Rengo is aiming for at least a 5% wage increase across all companies, with a slightly higher 6% target for small and medium enterprises.
“We are expecting this year’s spring wage negotiations to conclude at somewhere around 5%, not much of a slowdown from last year’s 5.1%,” said Meiji Yasuda’s Kikkawa. “Labour shortages will likely sustain pay momentum.”
Ueda also indicated in December that the momentum of wage negotiations could become apparent even before Rengo’s official tally in March.
There are already some promising signs from individual companies, including retail giant Aeon Co
and insurer Nippon Life Insurance reportedly planning to raise the salaries of some employees by at least 6%.
Japan’s persistently tight labour market is also likely to keep pressure on companies to continue raising wages to attract and retain talent. — Bloomberg
