Japan July real wage growth hovers at 6-year high due to low prices

[TOKYO] Japanese real wage growth in July stayed around six-year highs, data showed on Monday, but the gain was boosted in part by the effect of falling prices, highlighting the challenges the government faces in beating decades of deflationary trends.

Real wages, which are adjusted for inflation, in July jumped 2.0 per cent from a year earlier, matching the pace in June - the highest since July 2010. Wage growth in June was revised to 2.0 per cent from a preliminary increase of 1.8 per cent, data from the labour ministry showed.

Prime Minister Shinzo Abe has struggled to pull the economy out of deflation and boost growth despite his recipe of bold monetary easing, fiscal spending and structural reforms. While pay rises and higher spending are key for the success of Abenomics, wage gains inflated by low prices may not spur private consumption, which remains stubbornly weak.

"Real wages grew 2.0 per cent partly because the core consumer price index fell 0.5 per cent in July," said a labour ministry official, adding that gains in nominal cash earnings also helped.

Japan's July consumer prices fell by the most in more than three years as more firms delayed price hikes due to weak consumption.

Wage earners' nominal cash earnings continued to rise, up 1.4 per cent in July, the same gain as in the previous month and the highest increase since March.

Special payments rose 4.2 per cent in July, compared with a revised 3.6 per cent gain in June. As special payments are generally small, even a slight change in the amount can cause big percentage changes.

Regular pay, which determines base salaries, increased 0.4 per cent.

REUTERS