Japan’s Dec real wages, household spending fall again

Pedestrians are reflected on a wall of a shopping mall in Tokyo, Japan November 15, 2022. REUTERS/Kim Kyung-Hoon/File Photo

TOKYO  —Japan’s real wages fell for a 21st straight month though at a slower pace, while household spending dropped for a tenth consecutive month, showing that inflation outpaced wage recovery and continued to weigh on consumer spending.

Japan’s wage trend, along with inflation, is closely watched, with the Bank of Japan regarding both indicators among the key data to consider in preparation for phasing out its massive stimulus policy.

Prime Minister Fumio Kishida has repeatedly called for business leaders to increase wages at spring labor negotiations to a level higher than last year’s to beat inflation.

Japan needs price increases to be propelled by demand and higher pay, instead of the cost-push inflation led by energy prices and a weak yen.

READ: Japan’s Nov real wages down for 20th straight month

Inflation-adjusted real wages, a barometer of consumer purchasing power, fell 1.9 percent in December from a year earlier, but the pace of the decline slowed from a revised 2.5 percent drop in November, data from the labor ministry showed. It was the slowest pace of decline since June 2023.

Annual labor talks

The consumer inflation rate the government uses to calculate real wages, which includes fresh food prices but excludes rent or equivalent, slowed to a 3-percent gain, the slowest pace of increase since June 2022, reflecting receding inflationary pressure from raw material costs.

Total cash earnings, or nominal pay, climbed 1 percent for the month, after a revised 0.7 percent gain in November.

Japan’s biggest business lobby Keidanren and trade unions started annual labor talks earlier this month that may pave the way for the BOJ to exit its decade-long super-loose monetary policy.

READ: Japanese firms, unions kick off wage talks

For the full year, over 40-year-high consumer inflation weighed down on Japan’s real wages, which dropped 2.5 percent, the biggest decline since 2014 when the nation raised sales taxes.

Subdued household spending

Nominal wages grew 1.2 percent last year, slowed down from a 2-percent increase the previous year.

Japanese household spending in December fell 2.5 percent from a year earlier, government data showed on Tuesday.

That was slightly worse than the median market forecast for a 2.1-percent decline.

On a seasonally adjusted, month-on-month basis, spending slipped 0.9 percent, versus an estimated 0.2 percent increase.

Spending on household durable goods such as air-conditioners dropped due to warm weather, while expenditure on dining out and auto related goods rose, the data showed.