Japan real wages climb for third month in March, backing case for BOJ rate hike

[TOKYO] Japan’s real wages rose 1 per cent in March from a year earlier, government data showed on Friday (May 8), in a third straight month of gains that bolster the case for the Bank of Japan (BOJ) to raise interest rates at its next policy meeting in June.

The data highlight solid growth in Japanese wages, as March’s spring wage negotiations resulted in hikes of above 5 per cent for a third consecutive year.

The BOJ, which next reviews interest rates Jun 15 to Jun 16, considers steady rises in wages and prices as a prerequisite for another hike. Nearly two-thirds of economists polled by Reuters expect the BOJ to raise its benchmark rate to 1 per cent by end-June.

The inflation-adjusted pace of wages, a key measure of household purchasing power, eased from a revised 2 per cent gain in February but exceeded January’s 0.7 per cent uptick, which marked the first real pay rise in 13 months.

Average nominal wages, or total cash earnings, rose 2.7 per cent to 317,254 yen (S$2,565.32), after a revised 3.4 per cent jump for February.

Nominal pay growth outpaced the consumer inflation rate the ministry uses to calculate real wages, which was 1.6 per cent in March, staying below the BOJ’s 2 per cent target for a third consecutive month.

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Consumer inflation in Japan has been easing as government subsidies offset rising import costs from a weak yen, as well as surging oil prices due to the Iran war.

Workers’ base salaries, or regular pay, grew 3.2 per cent in March, slowing from a revised 3.4 per cent rise in the month prior. Base salary growth for full-time workers grew more than 3 per cent for a third straight month.

Overtime pay also rose 1.9 per cent. Special payments, consisting mostly of one-time bonus payments, fell 1.5 per cent after a revised 7.5 per cent jump for February. REUTERS