Japan’s Real Wages Fell At Their Fastest Rate Since 2014 In January

According to data from the labour ministry released on Tuesday, four decades of high inflation caused Japan’s real earnings to see their steepest decline in over nine years in January, which reduced consumer purchasing power. Market observers are closely monitoring wage patterns in the third-largest economy in the world since Bank of Japan officials have stated that pay increases and 2% inflation are necessary for it to reduce its ultra-loose monetary policy. Real wages are falling despite the fact that big Japanese companies like Toyota, Nintendo, and Fast Retailing have announced plans for unprecedented pay increases in response to appeals from politicians and union demands. A measure of households’ purchasing power, inflation-adjusted real wages dropped by the most since May 2014, 4.1%, in January. It came after a downward revision of 0.6% for December. Overall cash earnings, or nominal wages, increased by 0.8% year over year in January, which is significantly less than the 4.1% growth that was first reported for December, when large one-time winter bonuses helped to raise overall compensation. The meager nominal pay rise was less than the 5.1% consumer inflation rate that was used to determine pay in real terms, which includes fresh goods but does not include owners’ equivalent rent. The speed was the highest since 1981. One indicator of the health of the economy is overtime pay, which increased 1.1% year over year in January. This was the slowest growth in 22 months. In January, special payments decreased by 1.7% after increasing by a revised 6.5% in December. Apart than the bi-annual bonus seasons of November to January and June to August, the indicator has a tendency to be volatile. The following table displays preliminary information for January’s workforce count and monthly incomes: ———————————————————————————————— Payments (amount) (% change annually) $2,035 in total cash profits, or 276,857 yen 265,800 yen each month, plus or minus 0. Normal pay: +0.8 – 247,153 yen 18.647 yen in overtime pay, or +0.8 11,057 yen in special payments at +1.1 -1.7 ———————————————————————————————— Amount of employees (million) (% change yearly) Total: 51.693 + 1.6 – General: 35.222 + 0.9 – Part-time: 16.471 + 3.0 ———————————————————————————————— The ministry defines “workers” as 1) those employed for more than one month at a company with more than five employees, or 2) those employed on a daily basis at a company with more than five employees who had less than a one-month contract but had worked more than 18 days in the two months prior to the survey.