Japan Wages Gain in Boost for Abe's Drive to Reflate Economy
Japan’s wages rose by the most in a year in April, a gain that supports Prime Minister Shinzo Abe’s campaign to reflate the world’s third-biggest economy after 15 years of falling prices.
Monthly wages including overtime and bonuses rose 0.3 percent from a year earlier to 273,427 yen ($2,746), the Labor Ministry said today in Tokyo. Abe aims to sustain investor and public confidence amid market volatility, with the Topix index of stocks swinging betweens gains and losses today.
Japan’s economy expanded the most in a year last quarter as consumers responded to the campaign mounted by Abe and Bank of Japan chief Haruhiko Kuroda. Major Japanese companies may boost summer bonuses by 7.4 percent, the most since 1990, according to a survey published last week by Keidanren, the country’s biggest business lobby.
“The effects of Abenomics are appearing little by little,” said Junko Nishioka, chief economist at Royal Bank of Scotland Group Plc in Tokyo and a former official at the central bank. “Wages, mainly bonuses, will probably be on an upward bias as corporate profits are recovering. The improvement in wages will probably support consumption.”
Gross domestic product last quarter rose an annualized 3.5 percent, the biggest gain in a year, the Cabinet Office said on May 16. Private consumption, which makes up 60 percent of the economy, contributed 2.3 percentage points to the increase.
The index of regular earnings, excluding overtime and bonuses, for full-time employees rose to 100.9 in April, the highest since October 2008, according to today’s report.
The Topix index rose 0.8 percent as of 12:47 p.m. in Tokyo today after falling as much as 1.9 percent earlier. Japanese equities have corrected after soaring since elections were announced in November that brought Abe to power on a platform of monetary and fiscal stimulus. The Bank of Japan has pledged to reach 2 percent inflation within two years by doubling the monetary base through asset purchases.
Employment rose by 40,000 jobs in April, and the labor force participation rate was at 59.6 percent from 58.9 percent in March, according to the government statistics bureau. The jobless rate was 4.1 percent, unchanged from March and compared with a 4.3 percent rate in February.
UBS AG analysts said Japan’s shrinking labor force means salaries need to rise even more to prevent total wages from contracting and damping consumer spending capacity. The aggregate wage level may not rise even with wages growing 1 percent per worker, Hong-Kong based economists Duncan Wooldridge and Silvia Liu wrote in a May 23 report.
“Historically the growth rate in Japan’s labor force is an excellent indicator for inflation,” they said. “Can Japan sustainably lift aggregate demand above supply? If that cannot be done then it’s hard to see deflation resolved in a fundamentally positive way. Aggregate demand is heavily influenced by demographics and exports.”
Toyota Motor Corp., which employs almost 70,000 workers in Japan, approved the biggest salary bonus in five years in agreeing to a union proposal for a 2013 average of about 2.05 million yen, compared with 1.77 million yen in 2012, the company said March 13. The increase follows similar raises by Honda Motor Co. and electronics group Hitachi Ltd.
Convenience store operator Lawson Inc. said in February that it will raise the basic wage of some employees by about 3 percent. Seven & I Holdings Co., owner of the 7-Eleven convenience-store brand, said in March it will raise wages of about 50,000 employees at its 54 group companies.
In a May 17 speech, Abe said he wants to boost private investment to 70 trillion yen a year -- the level before the 2008 financial crisis -- through deregulation, tax changes, spending and equipment-leasing deals. He aims to triple infrastructure exports to about 30 trillion yen by 2020.
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