Monthly wages for Japanese workers edged higher in October but at a slower pace than the previous month as bonus payments slowed sharply.
Labour cash earnings rose 0.6 per cent year on year in October, according to the Ministry of Health, Labour and Welfare, in line with economists’ forecasts compiled by Bloomberg. That was below the September figure of 0.9 per cent growth.
Real cash earnings, which account for inflation, rose 0.2 per cent year on year in October, the first increase since December 2016.
Overtime pay crept 0.2 per cent higher, slowing from 1.2 per cent growth in September.
Marcel Thieliant, senior Japan economist for Capital Economics, said that wage growth is now running above productivity growth but faster gains are needed to meet the Bank of Japan’s 2 per cent inflation target.
Output per employed person has been rising by just 0.4% per annum over the last five years. Wages are now rising a touch faster than productivity which suggests that employers are starting to feel some cost pressures. However, firms remain reluctant to lift prices as service inflation remained at 0% y/y in October. The key point though is that wages would have to rise by 2.5% per year to meet the BoJ’s 2% inflation target. That is still a long way off.