Japan's 0.5% wage increase last year was the biggest since 2010

[TOKYO] The wallets of Japan's workers ended up a bit fatter last year, with total earnings rising the most since 2010.

Total pay rose 0.5 per cent from the previous year to an average 3.78 million yen (S$47,417), while the number of hours worked dropped. Regular workers saw an increase in pay, while part-timers, who are an increasingly large sector of the workforce, saw their income decline 0.1 per cent.

The rise provided some good news for workers and the government, which has repeatedly exhorted employers to boost workers' pay to create a virtuous cycle of rising wages and profits that translate into higher spending and inflation.

Even so, total pay was still less than in 2014, showing the effect of stingy raises which are undercutting spending and inflation.

Core consumer prices fell in 2016, the first annual decline since Haruhiko Kuroda took over at the Bank of Japan with a mandate to end deflation. Adjusting for that drop meant that workers actually got a 0.7 per cent increase in income last year, which had fallen in real terms in the previous four years.

Last year's wage gain is welcome news, said Masaki Kuwahara, senior economist at Nomura Securities Co, but shouldn't be overstated.

"It's good that the increase was high, but it wasn't that high," he said.

"It's positive, but I'm not attaching that much importance to it."

The data comes ahead of annual spring wage negotiations between business management and labour leaders.

Japan's labour market is surprisingly tight, with the unemployment rate just a fraction over 3 per cent. Key stumbling blocks here are unions and employees who've put job security above pay hikes, low productivity in areas of strong demand for workers, and a growing number of people in contract and part-time roles with little bargaining power.

"Unions are focused on protecting employment, and they're not asking for strong wage increases," Nomura's Mr Kuwahara said.

"No matter how hard the government pushes for higher wages, that won't change."

BLOOMBERG