Japan's wages drop at double the pace expected by economists

[TOKYO] Japanese wages fell in November for an eighth straight month, dropping at more than double the pace expected by economists, as employers continued to be cautious about the profit outlook amid a global resurgence of the coronavirus.

Labour cash earnings slid 2.2 per cent from a year earlier, as year-end bonus payments plunged, labour ministry data showed Thursday. Economists had predicted an overall 0.9 per cent decline.

Falling wages add to headwinds for many Japanese households and the businesses that depend on their spending. The country is also facing the prospect of another state of emergency that is expected to be declared for Tokyo and neighbouring prefectures later Thursday amid spiking virus cases.

KEY INSIGHTS

Falling wages darken the outlook for any sustained rebound in consumer spending, which accounts for more than half of Japan's economy and has been key to the recovery so far. Pay declines are likely to steepen in December as the bonus season hits full swing and more workers see smaller pay packets.

"Winter bonuses are more often paid in December so the drop in wages will probably worsen another notch next month," said economist Takeshi Minami, at Norinchukin Research Institute. "That will certainly have a negative impact on consumption."

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The pay declines come as services businesses that employ millions of workers grapple with a rapid rise in virus cases at home. Prime Minister Yoshihide Suga is expected later Thursday to announce another state of emergency for Tokyo and environs that is likely to include a call for restaurants and bars to close by 8pm.

So far, Japan's companies have fired fewer workers than in many other major economies, keeping unemployment at a low rate of 2.9 per cent, but pay cuts have been part of the trade-off. Big Japanese businesses last month reported they slashed year-end bonuses the most since the global financial crisis.

Bonus payments fell 22.9 per cent.

Overall wages adjusted for inflation fell 1.1 per cent in November compared with the prior year. Analysts had forecast a 0.2 per cent increase amid the steepest declines in consumer prices in a decade.

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