Never mind Japan’s upcoming annual spring wage talks, which are expected to see labor unions take another drubbing from the country’s biggest companies.
Demographics may provide the pay raises needed to help invigorate Japan’s economy and nudge price gains toward the central bank’s 2 percent inflation goal by the end of next year, according to Robert Feldman, a senior adviser at Morgan Stanley MUFG Securities Co. in Tokyo.
“Everything I’m hearing on spring wage negotiations suggests that it won’t be all that strong,” Feldman said in an interview, referring to pay hikes. “I don’t really care.”
Rising hourly pay, though, driven by a labor shortage, tells a "very interesting" story, he said. If not for an unheralded increase in the number of foreign workers, the pressure would be even greater, according to Feldman.
Hourly wages rose 1.96 percent in the fourth quarter, just below a seven-year high set the previous quarter, according to government data and calculations by Morgan Stanley MUFG. That compared with 0.5 percent growth in December in the headline labor cash earnings, which measures all forms of compensation.
Demand for employees in labor-intensive service sectors will rise as the Japanese workforce shrinks, and the arrival of foreign workers will only go so far to keep the jobless rate from falling further, Feldman wrote in a research note last month.
To be sure, not all economists are as bullish as Feldman on the prospect of pay gains, and one sticking point has been low productivity in the areas of the greatest shortage, crimping the capacity of some businesses to raise compensation.
The bottom line from Feldman, though: an unemployment rate of 2.5 percent by the end of 2018, implying wage growth of 4.9 percent and a 2 percent reading on the Bank of Japan’s new core inflation gauge, according to Feldman.
Japan’s jobless rate was 3.1 percent in December and the new core price measure rose 0.1 percent.
“It’s not happened yet, so nobody wants to believe it," Feldman said. "I can understand that. I’m trying to tell people that, look, demographics are already at a very different point now.”