Japanese wages fell again in December
TOKYO: Wages in Japan fell at the fastest pace in 16 months in December as companies pared winter bonuses, signaling a slump in consumer spending that may prevent the central bank from raising interest rates.
Monthly wages, including overtime and bonuses, fell 0.6 percent from a year earlier, the Labor Ministry said Wednesday. Workers brought home an extra 5,500, or $45, in total pay in 2006.
The Bank of Japan, in a meeting of its policy board last month, held the key interest rate at 0.25 percent, with most of the board members saying they needed to further examine prices and consumer spending. Falling wages may hamper the economy’s recovery from more than seven years of deflation.
“Poor wage data is a negative factor for a February rate hike,” said Takuji Aida, chief economist at Barclays Capital in Tokyo. “Nothing determines the future of prices and consumption more than wages.”
Unemployment hovering near an eight-year low and the biggest labor shortage in 14 years have yet to reverse a decade-long slide in wages that sidelined consumers and, according to Aida, plunged the economy into deflation.
Wages rose only 0.2 percent last year, after falling about 10 percent between 1997 and 2005.
Average pay fell to 610,820 in December, and year-end bonuses dropped 0.5 percent. Most companies in Japan pay two bonuses a year, which add up to the equivalent of about two months’ salary.
Household spending fell every month last year, the statistics bureau said Tuesday. Private consumption, which accounts for more than half of the Japanese economy, the world’s second-largest after the United States, had its steepest decline in almost a decade in the third quarter. That slowed economic growth, caused the government to downgrade its assessment of the economy, and has forced the central bank to keep rates on hold.
Japan’s spending slump may have been exaggerated by a downward bias in some of the statistics themselves, which the governor of the Bank of Japan, Toshihiko Fukui, has called “puzzling.” Still, the numbers have caused government and central bank officials to address the concern that corporate profits have yet to filter to households.