Japan September real wages down for sixth month despite strong nominal growth

TOKYO: Japan's nominal wages grew in September at the fastest pace in four years, but real pay growth fell for a sixth month on high consumer prices, official data showed on Tuesday (Nov 8).

Absent a strong wage growth, rising living costs exacerbated by the yen's fall to 32-year-lows will likely suppress Japan's recovery from the pandemic, as policymakers rush to support the feeble economy with a US$200 billion fiscal package and ultra-loose monetary easing.

In September, inflation-adjusted real wages, a key indicator of consumers' purchasing power, fell 1.3 per cent from a year earlier, after a 1.7 per cent decline in the previous month, the labour ministry said.

The consumer price index the ministry uses to calculate real wages, which includes fresh foods but excludes owners' equivalent rent, rose 3.5 per cent in September from a year earlier, the same pace as in August.

While nominal total cash earnings rose 2.1 per cent in September, the biggest year-on-year increase since June 2018's 2.8 per cent, price inflation kept the real wage growth in negative territory. Japan's real wages have been falling since April.

Overtime pay, a gauge of corporate activity strength, rose 6.7 per cent year-on-year in September, the largest gain in 14 months.

Special payments surged 20.3 per cent in September, yet the reading tends to be highly volatile in months other than the June to August and November to January bonus seasons.

A relatively large expansion in regular workers' pay brought about the multi-year high growth in September total cash earnings, a health ministry official said, adding the overall picture that nominal wages are growing on Japan's reopening from the COVID-19 pandemic "hasn't changed much".