Salaries in Japan increased for the first time in nearly two years in January, as companies boosted pay for part-time workers, aiding Japanese Prime Minister Shinzo Abe’s efforts to end 15 years of deflation.
Base pay excluding bonuses and overtime rose 0.1 percent from a year earlier — the first gain in 22 months — while overall pay fell 0.2 percent in the first drop in three months, the Japanese Ministry of Health, Labor and Welfare said yesterday.
Consumer spending and industrial output are surging ahead of a sales tax increase next month, fueling demand for workers.
“The tightening labor market is putting upward pressure on wages,” Dai-ichi Life Research Institute chief economist Hideo Kumano said. “We still need to see a higher rate of increase in pay to be assured of growth prospects after the sales tax hike.”
The world’s third-biggest economy is gathering momentum as companies and consumers rush to make purchases before the sales tax rises to from 5 to 8 percent.
Once the rush passes, the country’s economy is forecast to shrink by an annualized 3.9 percent in the three months starting next month, snapping a projected fifth straight quarter of growth, according to a Bloomberg survey.
Wage gains remain below the rate of inflation, which is cutting into consumers’ real spending power, showing that Abe has work to do for his “Abenomics” reflation drive to succeed.
Consumer prices excluding fresh food rose 1.3 percent in January, matching the fastest pace since 2008 and advancing more than halfway toward the 2 percent target that Bank of Japan Governor Haruhiko Kuroda is shooting for with unprecedented easing.
“Sluggish wage growth in Japan remains a major stumbling block to higher inflation and the overall success of Abenomics,” Marcel Thieliant, an economist at Capital Economics in Singapore, wrote in a research report.
Abe has urged companies to boost wages, saying higher pay is key to bolstering consumption and driving a virtuous cycle of economic growth.
Business and union leaders are in talks on wages for the fiscal year starting next month, with firms including Lawson Inc, Japan’s second-largest convenience store chain, saying they plan to hike salaries.