Average overall monthly earnings rose 0.4 percent from a year earlier to 437,362 yen ($4,255) after a 0.6 percent gain in May, the labor ministry reported today, below the median forecast of 0.8 percent in a Bloomberg News survey of six economists. Excluding bonuses and overtime, pay increased 0.3 percent, the first gain in 27 months.
Prime Minister Shinzo Abe needs wages to rise faster than inflation to support consumption and drive an economic recovery. Retail sales and household spending dropped in June, and industrial output fell the most since the March 2011 earthquake, underscoring the widening impact of a 3 percentage point sales-tax increase in April.
“Wage increases have yet to spill over to smaller companies,” Hideo Kumano, executive chief economist at Dai-ichi Life Research Institute in Tokyo, said after the data. “Unless wages rise in real terms, we can’t say deflation has ended.”
Japan’s Topix (TPX) index retreated from a six-month high, falling 0.2 percent at the close in Tokyo after earnings at companies from Nintendo Co. to Denso Corp. came in below forecasts. The yen was little changed against the dollar at 102.82 as of 3:42 p.m.
Adjusted for inflation, overall pay fell 3.8 percent. Data last week showed consumer prices increased 3.6 percent in June from a year earlier.
Bank of Japan policy board member Takahide Kiuchi today highlighted the risk of a continued slide in pay.
“In a situation where real wages per employee are likely to continue declining for the time being, the pace of improvement in real compensation of employees is likely to be moderate,” Kiuchi said in a speech in Kobe. “In such a case, the uptrend in private consumption may weaken.”
Abe has called on companies to dig into record cash holdings for investment and higher wages.
After recording an unprecedented 1.82 trillion yen profit last year, Toyota Motor Corp. plans to boost pay to directors by 19 percent for the previous fiscal year. This compares with the world’s largest automaker’s agreement in March to increase base wages in Japan by 0.8 percent of last fiscal year’s average salary, with total pay to rise 8.2 percent.
The average minimum wage is seen rising 16 yen an hour nationwide in this fiscal year from 764 yen last year, according to a statement on the labor ministry website.
Summer bonuses at large companies rose 7.2 percent from a year earlier, the largest gain since 1990, the Keidanren business lobby reported today.
To contact the editors responsible for this story: Brett Miller at firstname.lastname@example.org Andy Sharp, Arran Scott