The streets of Ginza district in Tokyo, Japan.
Shiho Fukada | Bloomberg | Getty Images
Inflation-adjusted wages in Japan fell after two months of gains during the summer bonus season, data showed on Tuesday, while household spending also fell, reducing the chances of the central bank raising interest rates in the near term.
According to data from the Ministry of Health, Labor and Welfare, real wages in the world’s fourth-largest economy fell 0.6% in August from a year earlier. Previously, it rose 0.3% in July after a revision.
Separate data showed household spending fell 1.9% in August from a year earlier, potentially raising doubts about the strength of private consumption, which accounts for more than half of Japan’s economy.
However, the decline was smaller than the 2.6% drop expected by the market in a Reuters poll, and spending rose 2.0% month-on-month on a seasonally adjusted basis, marking the fastest growth in the next year.
Real wages rose in June for the first time in more than two years as companies boosted summer bonuses, although the Ministry of Health, Labor and Welfare said the contribution of such special payments to the data would begin to wane in August.
These payments increased by 2.7% in August, compared with revised rates of 6.6% in July and 7.8% in June.
Sustained wage growth is a prerequisite for the Bank of Japan to raise interest rates again after raising interest rates for the first time in 17 years in March and subsequent hikes in July.
While the Bank of Japan said in its quarterly report on Monday that rising prices and wages are spreading across Japan, it also noted concerns among small and medium-sized enterprises about the ensuing pressure on profits.
Nominal wages, the average total cash earnings per worker per month, rose 3.0% from August last year to 296,588 yen ($1,999.11), compared with an annual increase of 3.4% in July.
Basic wages, or regular wages, also rose by 3.0%, while overtime wages, a barometer of corporate strength, increased by 2.6%.
The consumer price index, which officials use to calculate real wages, which includes fresh food prices but excludes landlord equivalent rent, rose 3.5% in August, the highest increase since October.
