Japan real pay falls for 13th month in challenge for Kishida
JAPANESE workers’ real wages continued to fall in April, even after reflecting some of the gains from a solid win in annual pay negotiations, creating a headache for Prime Minister Fumio Kishida as he mulls calling an election.
Real cash earnings for Japan’s workers dropped 3.0 per cent from a year earlier in April, slipping for the 13th month, the labour ministry reported on Tuesday (Jun 6). Economists had forecast a 2.0 per cent decrease. Overtime pay showed weakness.
Nominal cash earnings increased 1.0 per cent from the previous year, also weaker than analysts’ expectation of a 1.8 per cent gain.
The continued fall in voters’ spending power comes at an awkward time for Kishida as he considers whether to call an early election. Sluggish payrolls won’t help shore up support for Kishida and may force him to wait and see a little longer before he dissolves parliament.
The lack of strength in wages also suggests that the Bank of Japan still needs time before it considers adjusting its accommodative policy. Governor Kazuo Ueda has repeatedly maintained that the bank will continue with large-scale easing to achieve its 2 per cent price goal in a sustainable and stable manner, along with wage increases.
Ueda also warned in a speech in mid-May that the cost of making premature policy adjustments is larger than that of waiting.
April’s wage figures are discouraging, given the promising results of this year’s salary negotiations. Japan’s major labour unions and employers reached agreements to raise overall wages by a record 3.66 per cent on average as of Jun 1, according to Rengo data.
A separate report showed that Japan’s households cut spending in April, an indication that higher prices are sapping consumers’ spending appetite. Household outlays fell 4.4 per cent from a year ago, compared with economists’ view of a 2.4 per cent decline. Spending also fell by 1.3 per cent compared to the previous month, suggesting a weak start to the second quarter.
Resilient consumption is key to Japan’s recovery. The preliminary gross domestic product figure for the first quarter showed that the country’s economy grew more than expected, driven by robust private and business spending. The revised figure, which is due on Thursday, is also expected to confirm a steady recovery after reflecting solid business investment. BLOOMBERG
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