Japan wages show sign of pickup in welcome news for Abe

[TOKYO] Japanese wage earners' cash earnings rose in December and declines in real wages slowed for a second month, a positive sign for policymakers' plan to re-charge a recession-hit economy though doubts remain about the prospect for sustained growth in wages.

Reflecting improved corporate earnings even as the broader economy has struggled, special payments, predominantly including bonuses, rose 2.6 per cent in the year to December, labour ministry data showed on Wednesday.

Winter bonuses likely grew for a second straight year, helping boost overall wages, a ministry official said.

The total cash earnings grew 1.6 per cent in the year to December, up for the 10th straight month. Real wages adjusted for inflation fell 1.4 per cent year-on-year in December - down for the 18th straight month - but the pace of falls slowed from the prior month's 2.7 per cent drop.

"Real wages will likely continue to improve in the coming months as inflation slows due to cheaper oil prices. That will be a welcome news for Abe as it supports consumer spending,"said Koya Miyamae, senior economist at SMBC Nikko Securities.

Prime Minister Shinzo Abe has urged companies to raise base salaries through spring labour-employer negotiations - key to his aim of generating a virtuous cycle of higher wages and consumption to reflate the economy and break a two decade cycle of tepid growth and deflation.

In a sign that Abe's stimulus policies have gained some traction, a Reuters poll showed last month 42 per cent of firms said they plan to raise wages as least as much as last year. Still, many are cautious with 44 per cent undecided.

"I expect the spring negotiations will result in pretty much the same rate of wage hikes as last year. Companies are still in no mood to boost base salaries due partly to murky outlook,"Miyamae said.

Regular pay, or base salaries which determine the trend of broader wages, rose 0.3 per cent, up for the first time in two months, reflecting a growing number of low-wage part timers.

This suggests companies remain cautious about substantially increasing fixed personnel costs, although a tighter labour market is expected to push up wages gradually, with the jobless rate at 17-year low and the job availability at 22-year high.

Overtime pay, a barometer of strength in corporate activity, rose 0.5 per cent in the year to December, up 21 months in a row.

For 2014, monthly average cash earnings rose 0.8 per cent, up for the first time in four years. Real wages slid 2.5 per cent, down for a third straight year.

REUTERS