Japan real wages down for 20th straight month in November

Japan real wages down for 20th straight month in November


Nominal pay grew 0.2pc in Nov, the slowest in nearly two years, after a 1.5pc increase in October

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TOKYO (Reuters) – Japanese workers' real wages kept shrinking for a 20th month in November, data showed on Wednesday, raising fresh alarm for the sustainability of the country's economic recovery as firms enter the period of annual pay negotiation with labour unions.

Japan's wage trend draws an unusual amount of attention from financial markets worldwide since the Bank of Japan regards pay and inflation outlooks as the most important data in considering the dismantling of its negative interest rate policy.

Inflation-adjusted real wages, a key determinant of consumer purchasing power, fell 3.0 per cent in November from a year earlier, faster than a 2.3pc decrease in October, data from the labour ministry showed.

The consumer inflation rate the government uses to calculate real wages, which includes fresh food prices but excludes owner's equivalent rent, decelerated to 3.3pc, the lowest since July 2022, thanks to falling fuel costs and moderating food price hikes.

However, nominal pay grew a paltry 0.2pc in November, the slowest in nearly two years, after a 1.5pc increase in October.

The main culprit behind the weak pay growth was a 13.2pc contraction in special payments, which gives an early glimpse into the winter bonuses companies paid to employees. But the indicator tends to be very volatile this time of year due to the small sample size collected during the year-end period.

"It's too early, if not misleading, to judge the winter bonus trends from November's special payments figure alone," a labour ministry official said.

Regular or base salary in November rose by 1.2pc year-on-year, almost the same as a revised 1.3pc increase in the previous month. Overtime pay, an indicator of business activity strength, increased by 0.9pc year-on-year, the first gain in three months.

Japanese businesses are entering the collective pay talks season known as "shunto", which culminates in March. Last year, major firms struck a deal with unions that resulted in the largest pay rises – 3.58pc – in three decades amid four-decade-high inflation.

For the 2024 shunto, the country's biggest labour group Rengo has said it will ask for at least a 5pc pay increase, including at least 3pc base salary growth, to cushion the lasting blow from higher costs of living.

Meanwhile, Tokyo's consumer inflation, a leading indicator of nationwide price trends, showed a further slowdown on

Tuesday, raising hopes for real wages to rebound eventually, which will provide supporting ground for the Bank of Japan's monetary policy normalisation.