Japan real wages slip in December, bonding hard for consumer spending

Economy - Mohit Shah - Feb 06,2017

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japan real wages slip in december bonding hard for consumer spending

On an annual inflation-adjusted basis, Japanese wages plunged in December for the first time in a year.

According to the government data revealed on Monday, it came as a setback for the hopes that consumer spending can lift the economic growth.

The labor ministry data highlighted inflation-adjusted real wages dropped 0.4 percent in the month of December as compared to a year earlier. This drop was followed by a reread flat reading in November.

As per the officials, the decline was triggered by a rise in the cost of living, which outdid nominal pay hikes. Moreover, higher prices for items like fresh vegetables have amplified living costs.

This data came as labor unionists and business leaders initiate the annual spring wage negotiations. These are projected to produce smaller wage gains as compared to last year due to increased ambiguity on the global outlook.

Business leaders have been called by Prime Minister Shinzo Abe to fund a sustainable economic recovery by hovering employee wages, however, it remains a struggle to quicken pay hikes despite the tight job market along with high corporate profits.

According to Reuters poll last month, nearly two-thirds of Japanese companies are considering no wage hikes in this current year.

Inflation-adjusted real wages rose 0.7 percent for the whole of 2016. These figures were up for the first time in five years.

Japanese policymakers have been urging companies to share more profits with workers, but firms are generally unwilling to raise wages amid uncertainty due to global and domestic demand. Consumption has also been lethargic in the face of a slow wage retrieval despite labor shortages in few sectors and low unemployment.