Japan June wages tumble, cast clouds over consumer spending

[TOKYO] Japan's inflation-adjusted real wages fell in June from a year earlier at the fastest pace in seven months and nominal wages tumbled by the most in more than five years, data showed on Tuesday, in a warning that consumer spending could weaken.

The data highlights the challenge policymakers face in generating a virtuous cycle, under which rising revenues prompt companies to boost wages so that households increase spending.

Total cash earnings fell 2.4 per cent in the year to June, falling the most since December 2009, labour ministry data showed.

Inflation-adjusted real wages fell an annual 2.9 per cent in June after being unchanged in May, in a warning sign for consumption.

Total cash earnings fell because a lot of companies paid summer bonuses a few months earlier than usual, which caused bonus payments in June to fall an annual 6.5 per cent, a labour ministry official said.

However, the large fall in nominal wages and persistent declines in real wages are likely to increase concerns that consumer spending will slow.

The jobless rate is near an 18-year low and job availability is near a two-decade high, but the tight labour market has so far not done much to push up wages.

Many companies, particularly small firms, remain hesitant to raise wages for fear of permanent rises in labour costs.

Regular pay rose an annual 0.4 per cent after a reading of unchanged in the previous month.

Overtime pay, a barometer of strength in corporate activity, also fell an annual 0.4 per cent to mark the fourth straight month of declines.

REUTERS