Japan's August wage growth slows, boding ill for consumption

[TOKYO] Japanese wage growth slowed in August and summer bonuses stood lower than last year, government data showed, boding ill for consumer spending needed to rev up the flagging economy.

Real wages, adjusted for inflation, rose just 0.2 per cent year-on-year, slowing from a revised 0.5 per cent gain in July, as nominal wages are slow to keep up with price increases of food and daily necessities, undermining the purchasing power of households.

Tepid wage growth will pile more pressure on policymakers facing fears of a recession while struggling to generate a virtuous growth cycle led by private-sector activity.

Total cash earnings rose 0.5 per cent year-on-year in August to 272,382 yen (S$3,248), up for two straight months, the labour ministry data showed on Monday.

Special payments - predominantly summer bonuses - rose 0.6 per cent, but those paid during a bonus period between June and August stood 3.4 per cent lower than last year, a ministry official said.

"We acknowledge that wages are increasing gradually. We don't think the data is that weak," the official said.

Many companies, particularly small firms, have been hesitant to boost wages to avoid marked increases in fixed labour costs.

Regular pay, which determines base salaries, rose an annual 0.5 per cent, up for a sixth straight month and marking the fastest rise since February 2008. Overtime pay, a barometer of strength in corporate activity, rose an annual 1.5 per cent.

REUTERS