TOKYO (Reuters) – Japanese workers’ real wages kept shrinking for a 20th month in November, data showed on Wednesday, raising fresh alarm for the sustainability of the country’s economic recovery as firms enter the period of annual pay negotiation with labour unions.
Japan’s wage trend draws an unusual amount of attention from financial markets worldwide since the Bank of Japan regards pay and inflation outlooks as the most important data in considering the dismantling of its negative interest rate policy.
Inflation-adjusted real wages, a key determinant of consumer purchasing power, fell 3.0% in November from a year earlier, faster than a 2.3% decrease in October, data from the labour ministry showed.
The consumer inflation rate the government uses to calculate real wages, which includes fresh food prices but excludes owner’s equivalent rent, decelerated to 3.3%, the lowest since July 2022, thanks to falling fuel costs and moderating food price hikes.
However, nominal pay grew a paltry 0.2% in November, the slowest in nearly two years, after a 1.5% increase in October.
The main culprit behind the weak pay growth was a 13.2% contraction in special payments, which gives an early glimpse into the winter bonuses companies paid to employees. But the indicator tends to be very volatile this time of year due to the small sample size collected during the year-end period.
“It’s too early, if not misleading, to judge the winter bonus trends from November’s special payments figure alone,” a labour ministry official said.
Regular or base salary in November rose by 1.2% year-on-year, almost the same as a revised 1.3% increase in the previous month. Overtime pay, an indicator of business activity strength, increased by 0.9% year-on-year, the first gain in three months.
Japanese businesses are entering the collective pay talks season known as “shunto”, which culminates in March. Last year, major firms struck a deal with unions that resulted in the largest pay rises – 3.58% – in three decades amid four-decade-high inflation.
For the 2024 shunto, the country’s biggest labour group Rengo has said it will ask for at least a 5% pay increase, including at least 3% base salary growth, to cushion the lasting blow from higher living costs.
Meanwhile, Tokyo’s consumer inflation, a leading indicator of nationwide price trends, showed a further slowdown on Tuesday, raising hopes for real wages to rebound eventually, which will provide supporting ground for the Bank of Japan’s monetary policy normalisation.
The table below shows preliminary data for monthly incomes and number of workers in November:
—————————————————————-
Payments (amount) (yr/yr % change)
Total cash earnings 288,741 yen ($2,004) +0.2
-Monthly wage 272,379 yen +1.2
-Regular pay 252,591 yen +1.2
-Overtime pay 19,788 yen +0.9
-Special payments 16,362 yen -13.2
—————————————————————-
Number of workers (million) (yr/yr % change)
Overall 52.807 +2.0
-General employees 35.686 +1.5
-Part-time employees 17.121 +3.6
—————————————————————-
The labour ministry defines “workers” as 1) those employed for more than one month at a company that employs more than five people, or 2) those employed on a daily basis or had less than a one-month contract but had worked more than 18 days during the two months before the survey was conducted, at a company that employs more than five people.
To view the full tables, see the labour ministry’s website at:
($1 = 144.1000 yen)
(Reporting by Kantaro Komiya; Editing by Chizu Nomiyama)
Comments