Japan’s May real wages post biggest drop in nearly 2 years on inflation

JAPAN’S real wages extended a decline in May to post the biggest year-on-year drop in nearly two years, government data showed on Tuesday, as consumer inflation hovering near a seven-year-high outpaced nominal wage growth, reducing households’ spending power.

Higher living costs amid low-wage growth are likely to curb Japan’s consumption-led economic recovery from the coronavirus pandemic.

Inflation is also a top issue for voters in an upper house election on Sunday, although Prime Minister Fumio Kishida’s ruling party likely to increase the number of seats it holds, according to an opinion poll published on Monday.

In May, inflation-adjusted real wages, a key gauge of consumers’ purchasing power, fell 1.8 per cent from a year earlier, the labour ministry said.

The biggest slump since July 2020 followed a downwardly revised 1.7 per cent decline in April.

The consumer price index the ministry uses to calculate real wages, which includes fresh food items but excludes owners’ equivalent rent, rose 2.9 per cent in May, hovering near 3.0 per cent in April that posted the largest jump since October 2014.

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Price inflation outpaced nominal total cash earnings, which rose 1.0% in May, down from a downwardly revised 1.3 per cent rise the previous month, the data showed.

Overtime pay, a barometer of corporate activity strength, rose 5.5 per cent year-on-year in May, which was the biggest advance in nine months and higher than April’s downwardly revised 5.0 per cent growth.

Special payments, which include seasonal bonuses firms often cut when they face headwinds, fell 7.0 per cent in May, yet the reading tends to be highly volatile in months other than the June to August and November to January bonus seasons.

The drop in special payments, which marked the biggest fall in 16 months, was the main reason for the slowdown of total cash earnings from April, a health ministry official said. REUTERS