Japan’s real wages rise first time in 27 months in June

JAPANESE workers’ real wages rose for the first time in more than two years, brightening the prospects for a recovery in consumption and the emergence of a positive growth cycle long sought by the Bank of Japan (BOJ).

Real cash earnings for workers climbed 1.1 per cent in June from a year earlier, turning positive for the first time since March 2022, the labour ministry reported on Tuesday (Aug 6). Economists had expected the reading to remain negative at minus 0.9 per cent. Nominal wages grew 4.5 per cent, far surpassing the consensus estimate of a 2.4 per cent rise. 

A more stable measure of the trend that avoids sampling problems and excludes bonuses and overtime showed wages for full-time workers increasing by 2.7 per cent, while base salaries gained 2.3 per cent, the most in nearly 30 years.

Tuesday’s data will come as welcome news for the BOJ after it raised interest rates and unveiled a roadmap for quantitative tightening last week. The central bank is looking for evidence that wage gains will fuel spending, spurring demand-led price gains in a virtuous cycle.

In explaining last week’s rate hike, Governor Kazuo Ueda noted that inflation has been on track, driven by positive factors including higher wages feeding into service prices.

A separate report showed that household spending fell in June, with real outlays adjusted for inflation sliding 1.4 per cent from a year earlier. Economists had forecast a 0.8 per cent decline. Spending edged 0.1 per cent higher from May.