Japan real wages down again after summer bonus bump, spending falls

TOKYO : Japan’s inflation-adjusted wages fell in August after two months of increases during the summer bonus season, while household spending also declined, data showed on Tuesday, knocking chances of the central bank raising interest rates any time soon.
Real wages in the world’s fourth-largest economy fell 0.6 per cent in August from the same month a year earlier, according to the Ministry of Health, Labour and Welfare. That came after a revised 0.3 per cent rise in July.
Separate data showed household spending declining 1.9 per cent from the year-earlier in August, potentially raising doubts about the strength of private consumption, which accounts for more than half of Japan’s economy.
The fall, however, was smaller than the market estimate for a 2.6 per cent drop based on a Reuters poll, and on a seasonally adjusted basis, spending rose 2.0 per cent from the previous month, marking the fastest pace of increase in a year.
Real wages had turned up in June for the first time in more than two years as companies bumped up summertime bonuses, though the labour ministry had said the contribution of such special payments to the data would wane from August.
Those payments rose 2.7 per cent in August versus a revised 6.6 per cent in July and 7.8 per cent in June.
Sustained wage growth is a prerequisite for the Bank of Japan to raise interest rates again after its first hike in 17 years in March and a follow-up increase in July.
While the central bank said in its quarterly report on Monday that a rise in prices and wages was spreading across Japan, it also noted the concern of small and medium-sized enterprises regarding attendant pressure on profit.
Nominal wages, or the average total cash earnings per worker per month, grew 3.0 per cent to 296,588 yen ($1,999.11) versus August last year, compared with an on-year 3.4 per cent rise in July.
Base, or regular, pay also rose 3.0 per cent, while overtime pay, a barometer of corporate strength, grew 2.6 per cent.
The consumer price index officials used to calculate real wages, which includes fresh food prices but excludes owners’ equivalent rent, climbed 3.5 per cent in August, the highest rise since October last year.
($1 = 148.3600 yen)