Japan Dec real wages post first rise in 9 months on 26-year-high nominal growth

TOKYO  – Japan’s real wages rose in December for the first time since March despite rising inflation, as nominal pay grew at the fastest pace in nearly 26 years with robust winter bonuses.

The market closely watches wage trends in the world’s third largest economy as high pay growth to counter price increases is seen as a crucial condition for the Bank of Japan to scale back its ultra-loose monetary easing.

Inflation-adjusted real wages, a gauge of households’ purchasing power, gained 0.1 percent in December from a year earlier to mark the first rise in nine months, the labor ministry data showed.

Total cash earnings, or nominal wages, grew 4.8 percent year-on-year in December, posting the biggest hike since January 1997’s 6.6 percent.

It matched a 4.8 g- percentrowth in the consumer price index the ministry uses to calculate the pay in real terms, which includes fresh foods but excludes owners’ equivalent rent. The inflation rate was the largest since May 1981’s 5.1 percent.

Special payments grew 7.6 percent in December, after a revised 3.1 percent growth in the previous month. The indicator reflects the trends of seasonal bonuses for winter in November to January and for summer in June to August.

“Companies usually deliver their biggest bonus payment of a year in December, but this 7.6 percent (rise) is substantial” compared to previous years, said a labor ministry official.

Overtime pay, a barometer of business activity strength, rose 3 percent year-on-year in December, led by double-digit increases among restaurant and other service-sector workers.

It followed a revised 5.4 percent rise in November.

A workforce crunch among the face-to-face industries could be a factor behind the rising compensation for service workers, said the official.

For the whole of 2022, Japan’s nominal wages grew 2.1 percent, the biggest annual hike since 4.4 percent logged in 1991. But four-decade-high inflation brought the real pay growth to the negative territory, marking a 0.9 percent decrease after a 0.6 percentgrowth in 2021.