JAPANESE workers’ real wages fell by the most in eight years, suggesting that there’s still a long way to go before the central bank can achieve its wage-growth accompanied price goal.

Real cash earnings for Japan’s workers dropped 3.8 per cent from a year earlier in November, declining for the eighth straight month, the labour ministry reported on Friday (Jan 6). Economists had predicted a 2.8 per cent slump.

The prolonged fall lends some credence to the view that Bank of Japan (BOJ) governor Haruhiko Kuroda won’t take further action for the remainder of his term. Kuroda has repeatedly stressed the bank will not move away from monetary easing until wages and prices rise stably, and insisted that December’s surprise move was purely to address market function and was not a step towards policy normalisation.

Nominal wages rose 0.5 per cent from the previous year in November, still weaker than the level Kuroda has said is necessary for sustainable price growth. The governor earlier indicated that Japan needs paychecks to grow at around 3 per cent to achieve the BOJ’s 2 per cent price goal.

Core inflation in Japan recently hit a four-decade high, making it increasingly difficult for wages to keep up. Price hikes are expected to continue this year, putting more downward pressure on consumption. November retail sales data already showed some inflationary impacts, with consumer spending unexpectedly falling despite a rebound in demand from foreign tourists.

Attention is being paid to the outcome of the upcoming spring wage negotiations, which will become clear a few weeks before Kuroda concludes his decade-long stint in April. The wage trajectory is expected to impact the BOJ’s policy direction beyond Kuroda’s term.

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Economists see payrolls going up to some extent, with a number of Japanese companies, including Canon and Kirin Holdings, reportedly planning to raise their base salaries.

Prime Minister Fumio Kishida repeated his call for firms to increase pay fast enough to remain ahead of inflation on Thursday, speaking to a gathering of senior business executives.

The government is also keeping a close eye on wage trends. A 71.6 trillion yen (S$722 billion) economic stimulus package unveiled by Kishida last year included incentives for businesses to increase wages, in addition to anti-inflationary measures. BLOOMBERG