Japan Salaries Extend Longest Fall Since ’10 in Threat to Abe

Japan salaries extended the longest slide since 2010 in July, raising the stakes for Prime Minister Shinzo Abe’s decision on whether to increase a sales tax.

Regular wages excluding overtime and bonuses dropped 0.4 percent from a year earlier, marking a 14th straight month of decline, according to data released today by the Ministry of Health, Labour and Welfare. Bonus payments rose 2.1 percent, helping to lift total cash earnings 0.4 percent.

Boosting workers’ incomes is key to the success of Abe’s efforts to resuscitate the economy after doses of fiscal and monetary stimulus helped weaken the yen and start a recovery, boosting corporate profits. With salaries sliding and consumer prices rising in July at the fastest pace since 2008 on higher energy costs, a sales-tax increase could squeeze households, threatening the success of the policies dubbed Abenomics.

“Companies aren’t confident enough on the sustainability of the economic recovery,” said Yoshimasa Maruyama, chief economist at Itochu Corp. in Tokyo. “If wages don’t improve much, it may pose a political risk” to Abe’s administration, he said.

Abe is set to decide by early next month on the sales tax, which under current legislation is set to rise to 8 percent in April and 10 percent in October 2015 from 5 percent now.

Economy Minister Akira Amari will today report the results of meetings of business leaders, academics and representatives of consumer groups who wrapped up week-long discussions over the weekend on the planned sales-tax increase, a key input for the prime minister’s decision.

Companies won’t increase workers’ basic salaries unless they are confident in the future, Amari said.

“We will make an environment in which they will have enough confidence” to raise wages, Amari said.

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