Japan Sept real wages fall at slower pace, spending still in doubt

[TOKYO] Japan's real wages fell at a slower annual rate in September, government data showed, but doubts about consumer spending are likely to linger as the government has made little progress with policies to promote economic growth.

Real wages, which are adjusted to reflect changes in consumer prices, fell 2.9 per cent in September from a year earlier, following a revised 3.1 per cent annual decline in August, data from the labour ministry showed on Wednesday.

Summer bonus payments grew at the fastest pace in 23 years, but this coincided with a slump in consumption, suggesting households were not confident enough to boost spending.

The wage report is likely to be of little comfort to Prime Minister Shinzo Abe, who is struggling with a slump in popularity amid a looming decision by year's end on raising the sales tax next year.

Doubts about real wages could make politicians reluctant to go ahead with a sales tax hike to 10 per cent from 8 per cent scheduled for October 2015.

Japan's economy shrank an annualised 7.1 per cent in April-June, the worst slump since the global financial crisis in 2009, as consumer spending and capital expenditure weakened after an initial increase in the sales tax to 8 per cent from 5 percent in April.

The wages data are also important for the Bank of Japan, which last week expanded its quantitative easing programme after inflation and inflation expectations started to slow.

Summer bonus payments, which cover the period from June to August, rose 3.1 per cent from a year ago, the largest gain since 1991, the data showed.

The bigger bonuses should be welcome news for policy makers hoping to stoke domestic demand, but consumers remain reluctant to open their wallets given a fragile economic recovery.

Overtime pay, a barometer of strength in corporate activity, rose 1.6 per cent in September from a year earlier. That was faster than a revised 1.2 per cent annual gain in August.

Total cash earnings rose 0.8 per cent in the year to September, slower than a revised 0.9 per cent annual increase in the previous month.

REUTERS