The labour ministry said that the basic wage increase accelerated to 2.6% year over year in September from 2.4% in Japan
Japan workers saw the biggest increase in base pay in over three decades, which also supports the Bank of Japan’s view that the economy is still in recovery.
The labor ministry said that the basic wage increase accelerated to 2.6% year over year in September from 2.4% in August. A more reliable measure of wage trends, which excludes bonuses or overtime, showed 2.9% growth for full-time employees, which was faster than the 2.8% growth in the previous month. Nominal cash earnings increased by 2.8%, missing the prediction of 3%.
The unfavourable news is that even as the price increase slowed in September after the government resumed subsidies to lower the gas and electricity bills, the real wages fell for the second consecutive month.
While the central bank held off the rising rates during its policy meeting last week, Governor Kazuo Ueda reaffirmed that Japan is on track to meet its inflation target, indicating another rate hike in the future.
Atsushi Takeda, the senior economist at Itochu Research Institute, affirms that wages are increasing. As expected, the trend is improving toward another rate increase.
Almost half of the economists expect the bank to raise the benchmark rate in December, while some predict the move will come in January.
Prime Minister Shigeru Ishiba is keeping a careful eye on salary patterns since he prioritizes the growth of real wages in his agenda. To accomplish that, the premier has directed the creation of an economic stimulus package, which will contain measures to support small and medium-sized companies that increase salaries and lessen the impact of price increases on household budgets.
Based on the upcoming annual negotiations between unions and corporate employers will determine the future of wage growth. Rengo is the largest labor union group in Japan. It stated that it aims for at least 5% in the negotiations, maintaining the same goal for the current fiscal year. The group achieved the biggest pay raise over 30 years this year, with an average gain of 5.1%.
Rengo’s chair, Tomoko Yoshino, stated that the wage increase for part-time employees and employees of small and medium-sized businesses would help decide if the momentum continues.
After following Rengo’s example, another large labor group requested a significant increase in the upcoming negotiations. UA Zensen, primarily made-up employees from smaller businesses, declared on Wednesday that they want a basic pay increase of 7% for part-time employees and 6% for regular employees.
Following BOJ’s October 31 policy, Ueda, at the news conference, stated that the economy would benefit if the wage increase in the next year were consistent with the current year’s results. The bank will not rely on rate decisions based on the pay negotiations. The current year’s wage increases significantly influence the bank’s decision to end this negative rate policy.
The yen depreciation after Donald Trump‘s win in the US presidential election raised the chances of inflation. Saisuke Sakai, a senior economist at Mizuho Research & Technologies, stated that BOJ was more concerned about the currency, more than internal issues like economy and pricing. He added that the BOJ could raise interest rates as early as December if a weaker yen pressures the central bank.
Import-driven inflation can risk dampening consumer mood after private spending increases for the first time in five quarters. The gross domestic figures for the summer quarter released next week confirm whether the consumption recovery continues.
The wage data released on Thursday partially reflect ongoing labor market pressure in Japan. The unemployment rate decreased to 2.4% in September, the lowest since January, while the job-to-applicant ratio increased. The BOJ indicated that the ongoing tightening of the labor market can support employee incomes.
