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Japan real wages rise in positive sign for consumption

Tokyo

JAPANESE workers' inflation-adjusted real wages rose for the first time in four months in March, government data showed, in a sign of a gradual increase in salaries that should help stimulate consumer spending.

The data will be encouraging to the Bank of Japan as it struggles to accelerate inflation to its 2 per cent target with sluggish wages keeping a lid on consumer spending. Many market players see the central bank in no rush to unwind its massive monetary stimulus. Despite more than five years of aggressive monetary easing, inflation remains subdued with firms wary of sharing their record profits with workers, prompting the BOJ to drop the timeframe for hitting its 2 per cent inflation goal.

Labour ministry data out on Wednesday showed that real wages rose 0.8 per cent in March from a year earlier, snapping back from a revised 0.8 per cent annual decline in the previous month.

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"The tight labour market is now creating noticeable cost pressures," said Marcel Thieliant, senior Japan economist at Capital Economics. However, "the upshot is that policy tightening remains a distant prospect".

Mr Thieliant estimates the jobless rate would have to fall to around 1.5 per cent from the current 2.5 per cent in order to see wage growth reaching levels consistent with hitting the BOJ's 2 per cent inflation goal.

The job market may not tighten further as a planned sales tax hike to 10 per cent from the current 8 per cent in October 2019 could dampen domestic demand, he added. REUTERS