Japanese wages adjusted for inflation fell the most in almost five years, adding to challenges for Japanese Prime Minister Shinzo Abe as he tries to revive the world’s third-largest economy.
Real earnings dropped 4.3 percent last month from a year earlier, a 17th straight decline and the steepest tumble since December 2009, the Japanese Ministry of Health, Labor and Welfare said yesterday.
A higher sales tax combined with the central bank’s record easing are driving up living costs, squeezing household budgets and damping consumption.
Abe’s task is to convince companies to agree to higher wages in next spring’s labor talks to sustain a recovery.
“Households are suffering from a decline in real income,” said Hiromichi Shirakawa, an economist at Credit Suisse Group AG who used to work at the Bank of Japan (BOJ).
Abe is trying to generate a virtuous cycle in the economy, where higher incomes fuel consumer spending, which in turn prompts companies to boost investment and wages.
Last week, he secured a pledge from business leaders to do their best to boost pay next year.
The government would aim for wages to increase faster than inflation next year, Japanese Minister of State for Economic Revitalization Akira Amari said last week.
BOJ Governor Haruhiko Kuroda yesterday said he would watch the spring wage talks “with strong interest.”
As income growth has slowed, Japanese have lowered the amount of money they save.
The savings rate in the year through March was minus-1.3 percent, the first time it had been negative in data since 1955, the Cabinet Office said.
With Japan’s population shrinking, companies are facing an intensifying labor shortage that Kuroda has said would prompt an increasing number of companies to boost pay to secure workers.
Yesterday’s data showed there were 1.12 jobs available for every person seeking a position, the most since 1992. The jobless rate, at 3.5 percent, remained at lows unseen since 1997.
The preliminary wage data lacks a large enough sample and includes some biases, so the final figures may be revised upward, Sumitomo Mitsui Asset Management Co economist Hiroaki Muto said.
“Looking ahead, wages will probably rise, but not accelerate,” Muto said.
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