Japan’s base wages adjusted for inflation last year matched a 16-year low in 2009, when the world was gripped by recession, posing a risk to consumer spending as the nation girds for a higher consumption tax.
Pay excluding bonuses and overtime payments dropped to 98.9 last year on a Japanese labor ministry index released yesterday that took price changes into account, equaling the level four years earlier. The gauge is based at 100 in 2010 in data back to 1990.
Japanese Prime Minister Shinzo Abe has called on firms to boost wages to sustain a reflationary effort so far driven by stimulus and the yen’s 18 percent drop against the US dollar last year. Amid a backdrop of market turbulence, business and union leaders met yesterday to start annual pay talks — due to end next month, a month before a 3 percentage point increase in the sales levy.
It’s “extremely important” that companies use profits boosted by Abenomics to raise wages and create jobs, Japanese Chief Cabinet Secretary Yoshihide Suga said in Tokyo yesterday, adding this was needed to create a positive cycle in which economic growth propels profits, employers raise pay and people spend more.
“The current market turmoil won’t affect wage negotiations,” Hiromasa Yonekura, head of Keidanren, Japan’s largest business lobby group, told reporters yesterday after meeting in Tokyo with Rengo, the nation’s largest trade union group. “Each company will do their utmost to increase wages, depending on their earning situation.”
In an interview in December last year, Abe urged companies to lift salaries faster than gains in the cost of living to help pull the nation out of a 15-year deflationary rut, stressing the importance of an increase in base wages. The prime minister has met five times since September last year with business and union chiefs to persuade them to boost workers’ pay.
Nobuaki Koga, head of Rengo, or the Japanese Trade Union Confederation, last month said it would seek overall base-salary increases of more than 1 percent in spring labor negotiations, and 2 percent for workers at small and medium-sized companies and non-regular workers.
“Base salaries may not rise as much as Rengo has requested” as executives may not be confident enough of Japan’s economic recovery to raise wages, Tokyo-based Nomura Securities Co economist Yoshiyuki Suimon said.
Monthly wages excluding overtime and bonus payments fell 0.2 percent in December last year from a year earlier to ￥241,525 (US$2,380) on average per worker, extending a decline to 19 months, the Japanese Ministry of Labor said yesterday. Overall wages rose 0.8 percent from a year earlier to ￥544,836, helped by a 1.4 percent climb in winter bonuses and increased overtime pay.
Boosted by the Bank of Japan’s unprecedented easing in pursuit of 2 percent inflation, consumer prices excluding fresh food increased 1.3 percent in December from a year earlier, a pace not seen since 2008.
Inflation will accelerate five times faster than wage gains in the year starting April, according to Bloomberg News surveys. Higher prices, coupled with the sales-tax rise, threaten to erode household spending power.