Japan’s job market remains tight, keeping pressure on wages
JAPAN’S labour market showed further signs of tightening in October, a development that will help keep upward pressure on wages.
The job-to-applicants ratio climbed to 1.35 last month, meaning there were 135 jobs offered for every 100 applicants, the labour ministry reported Tuesday (Nov 29). It was a slight rise from 134 positions a month earlier, and matched the economists’ forecast.
A separate report also showed the unemployment rate remained low in October. The jobless rate stayed at 2.6 per cent, according to the ministry of internal affairs. The number of people with jobs increased by around half a million compared to the year before, led by gains in the hospitality and medical sectors.
“The labour market is certainly tightening, but if you look at details, you see many openings in the service sector whose pay scale is low,” said economist Takeshi Minami at Norinchukin Research Institute. “In that sector, wage growth will be big in terms of percentage figures, but to get a 3 per cent raise in the entire labour market, you’d need nearly a 5 per cent raise in the spring wage negotiations including regular pay hikes.”
While the figures suggest the strong labour conditions will keep upward pressure on wages, they still show tightness in the labour market remains well below pre-pandemic levels. Those numbers failed to produce the wage gains sought by Bank of Japan (BOJ) Governor Haruhiko Kuroda, who has repeatedly maintained that Japan needs paychecks to grow at around 3 per cent to meet the central bank’s 2 per cent sustainable inflation goal.
For the BOJ to move away from its current accommodative policy, the labour market may need to strengthen further to encourage firms to raise wages at a faster pace. Whether gains can continue will partly depend on how the global economy fares, with the outlook appearing increasingly gloomy.
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The government is already making some efforts to push up pay. Prime Minister Fumio Kishida announced a 71.6 trillion yen (S$709.7 billion) economic stimulus package last month that includes incentives for businesses to increase wages and help support the economy, in addition to anti-inflationary measures.
A separate data report showed retail sales grew at a slower pace of 0.2 per cent in October compared with the previous month, as accelerating inflation cooled households’ appetite for shopping. Economists had expected gains of 1 per cent. Department store and supermarket sales rose 4.1 per cent from a year earlier.
“With inbound tourism resuming, consumption is holding up,” said Norinchukin’s Minami. “But wages are failing to keep up with inflation, cutting into incomes. That’s going to limit consumer activities.”
Retail sales increased 4.3 per cent from a year earlier, slightly slowing from the previous month and below economists’ 5.1 per cent forecast. Spending on clothing and accessories rose a seasonally adjusted 3.9 per cent from September, while sales of cars fell 6.8 per cent. BLOOMBERG
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