Japanese workers’ real wages continued to fall in April, even after reflecting some of the gains from a solid win in annual pay negotiations, creating a headache for Prime Minister Fumio Kishida as he mulls calling an election.
(Bloomberg) — Japanese workers’ real wages continued to fall in April, even after reflecting some of the gains from a solid win in annual pay negotiations, creating a headache for Prime Minister Fumio Kishida as he mulls calling an election.
Real cash earnings for Japan’s workers dropped 3.0% from a year earlier in April, slipping for the 13th month, the labor ministry reported Tuesday. Economists had forecast a 2.0% decrease. Overtime pay showed weakness.
Nominal cash earnings increased 1.0% from the previous year, also weaker than analysts’ expectation of a 1.8% gain.
The continued fall in voters’ spending power comes at an awkward time for Kishida as he considers whether to call an early election. Sluggish payrolls won’t help shore up support for Kishida and may force him to wait and see a little longer before he dissolves parliament.
The lack of strength in wages also suggests that the Bank of Japan still needs time before it considers adjusting its accommodative policy. Governor Kazuo Ueda has repeatedly maintained that the bank will continue with large-scale easing to achieve its 2% price goal in a sustainable and stable manner, along with wage increases.
Ueda also warned in a speech in mid-May that the cost of making premature policy adjustments is larger than that of waiting.
April’s wage figures are discouraging, given the promising results of this year’s salary negotiations. Japan’s major labor unions and employers reached agreements to raise overall wages by a record 3.66% on average as of June 1, according to Rengo data.
A separate report showed that Japan’s households cut spending in April, an indication that higher prices are sapping consumers’ spending appetite. Household outlays fell 4.4% from a year ago, compared with economists’ view of a 2.4% decline. Spending also fell by 1.3% compared to the previous month, suggesting a weak start to the second quarter.
Resilient consumption is key to Japan’s recovery. The preliminary gross domestic product figure for the first quarter showed that the country’s economy grew more than expected, driven by robust private and business spending. The revised figure, which is due on Thursday, is also expected to confirm a steady recovery after reflecting solid business investment.
What Bloomberg Economics Says…
“Looking ahead, we expect nominal pay growth to accelerate in May. There is usually a delay in timing of reflecting the result of the shunto, particularly for small and medium enterprises. But the gain likely still won’t exceed the inflation rate — undercutting the Bank of Japan’s efforts to achieve sustained 2% inflation.”
— Taro Kimura, economist
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