Persistent Wage Decline Amid Inflation Surge
Japan's real wages, adjusted for inflation, have been falling continuously for 13 consecutive months, according to recent data released by the government. This signifies that the recovery of wages is sluggish in the face of constant rises in consumer inflation.
Historic Wage Increases Yet to Impact Workers
In March, during discussions with unions, Japan's leading firms agreed to provide the most substantial wage raises in 30 years. These raises were intended to offset the higher cost of living that employees are currently facing. Nevertheless, data from Tuesday implies that it might take a while before workers begin to feel the impact of these wage increases.
Bank of Japan's Stance on Inflation and Wages
Kazuo Ueda, the Bank of Japan's Governor, emphasized the importance of maintaining an ultra-accommodative monetary policy to achieve the central bank's 2% inflation target. This target must be reached stably and sustainably and accompanied by wage growth.
Rapid Decline in Real Wages and Increase in CPI
Inflation-adjusted real wages, which measure households' purchasing power, plunged 3.0% in April compared to the previous year. This represents a faster downturn than the revised 2.3% decrease reported in March. The consumer price index (CPI) used by the ministry to compute real wages showed a 4.1% increase in April. This figure, which includes fresh food prices but excludes owners' equivalent rent, rose from a 3.8% increase in March.
Overtime Pay and Special Payments
While the inflation index is weighing down the overall wages, total cash earnings, or nominal wages, showed a modest year-on-year increase of 1.0% in April. However, this was slower than the revised 1.3% growth in March. Overtime pay, an indicator of business activity, saw a minor decrease of 0.3% in April compared to the previous year, following a revised growth of 1.2% in March. Meanwhile, special payments experienced a slight uptick of 0.2% in April, coming down significantly from a revised 11.6% surge in March.
