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Japan April real wages flat, bad sign for consumption
June 6, 2017 / 2:09 AM / 6 months ago

Japan April real wages flat, bad sign for consumption

TOKYO (Reuters) - Japan’s real wages were flat in April from the same period a year earlier, with rising prices offsetting gains in nominal pay and possibly hurting households’ purchasing power.

FILE PHOTO: Office lighting is seen through windows of a high-rise office building in Tokyo July 31, 2014. REUTERS/Issei Kato/File Photo

Real wages, which are adjusted for moves in consumer prices, were flat in April from a year earlier, labour ministry data showed on Tuesday. It followed a revised 0.3 percent annual fall in March.

Wage earners’ nominal cash earnings rose an annual 0.5 percent in April, the biggest rise in four months. Revised data showed that nominal wages were flat from a year earlier in March.

Real wage growth has been flat or even negative in the past seven months, suggesting the benefits of the recent economic recovery have yet to fully reach Japanese households. This is a headache for the government and central bank, which want sustained pay hikes to spur higher consumption and prices.

“Wages didn’t grow that much in April, so of course household spending won’t rise that much,” said Shuji Tonouchi, senior market economist at Mitsubishi UFJ Morgan Stanley Securities.

“Prices will rise a bit (on higher energy costs) but will probably run out of breath,” Tonouchi said.

The world’s third-largest economy has shown signs of life in recent months as a rebound in overseas demand helped boost its exports and output. It grew in the first quarter to mark the longest period of expansion in a decade.

But household consumption fell more than expected in April due to lower spending on cars and education, separate data showed, signalling consumer spending continues to lag behind improvement in other areas of the economy.

Regular pay, which accounts for the bulk of total pay and determines base salaries, has been generally rising in recent months and in April grew an annual 0.4 percent, the biggest increase in three months.

Special payments, such as bonuses, in April grew 5.6 percent from a year earlier, following a revised 1.7 percent annual rise the previous month, data also showed.

Special payments are generally small, so even a slight change in the amount can cause big percentage changes.

Overtime pay, a barometer of strength in corporate activity, dipped 0.2 percent in April from a year earlier, following a revised 0.6 percent annual decline in March.

Desperate to stimulate growth and end decades of deflation, the Bank of Japan has embraced negative interest rates and bought up mammoth volumes of bonds.

The massive extent of the BOJ’s money printing, however, has barely moved it nearer to its ultimate policy goal of lifting inflation to 2 percent, highlighting the difficulty facing the central bank as the scale of its bond buying appears unsustainable.

The ministry defines “workers” as 1) those who are employed for more than one month at a firm that employs more than five people, or 2) those who are employed on a daily basis or have less than a one-month contract but had worked more than 18 days during the two months before the survey was conducted at a firm that employs more than five people.

To view the full tables, see the labour ministry's website at: here

Reporting by Minami Funakoshi; Editing by Jacqueline Wong

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