High inflation in Japan has brought down wages
2023.03.07 03:52
High inflation in Japan has brought down wages
By Kristina Sobol
Budrigannews.com – According to official data, Japan’s real wages fell in January for the first time in nearly nine years as consumers’ purchasing power was eroded by inflation that had been at its highest level in four decades and undermined efforts by policymakers to revive an economy that had been devastated by COVID.
Market participants are keeping a close eye on wage trends in the third-largest economy in the world because officials at the Bank of Japan have stated that pay raises and inflation of 2% are necessary for it to reduce its loose monetary policy.
At a policy review on Friday, the central bank is expected to keep its extremely low interest rates, awaiting a leadership change that could eventually end the radical stimulus of outgoing head Haruhiko Kuroda.
According to data released by the labor ministry on Tuesday, inflation-adjusted real wages, a measure of a household’s purchasing power, decreased by 4.1% in January, the largest decrease since May 2014. It came after a revised decrease of 0.6% in December.
According to Azusa Kato, a senior economist at BNP Paribas (OTC:), “Real wages have probably hit the bottom in January as government subsidies on electricity and gas charges have taken effect in February and the base effects of commodity price hikes have run their course.” Securities.
“The Bank of Japan will come under pressure to modify its yield curve control as early as this week given that wage hikes are gaining momentum in preparation for the annual labor negotiations this month. It will endure stress even if it stays the same.
As major Japanese companies like Toyota, Nintendo, and Fast Retailing respond to calls from policymakers and union demands by announcing plans for historic pay raises, real wages are falling.
Japan’s economy avoided recession in the fourth quarter, but it recovered much less quickly than anticipated, putting off healing from the COVID-19 pandemic scars.
The data showed that in January, total cash earnings, or nominal wages, increased by 0.8% year-over-year, which was much less than the revised 4.1% increase in December, when strong one-time winter bonuses increased overall salaries.
In January, wage growth was only marginal, falling far short of the 5.1% consumer inflation rate used to determine real pay. Owners’ equivalent rent is not included in the inflation rate.
The fastest rate of core consumer inflation in Japan since 1981 is 4.2%, which excludes oil products but includes volatile prices for fresh foods.
In January, overtime pay, a measure of business activity strength, increased by 1.1% year-over-year, the weakest increase in 22 months.
After a revised increase of 6.5 percent in the previous month, special payments saw a decrease of 1.7% in January. Other than the twice-yearly bonus seasons of November to January and June to August, the indicator typically fluctuates.
