Japan wage growth at over 21-year high
Export growth is stagnating, so we may not see external demand drive the economy Takeshi Minami, chief economist at Norinchukin Research Institute
tokyo — Japan’s household spending slid in June but real wages rose at their fastest pace in more than 21 years thanks to higher summer bonuses, a sign the benefits of a prolonged economic recovery are broadening.
Household income also marked the fastest gain in three years on an increase in temporary workers’ pay, offering some hope for Bank of Japan policymakers struggling to accelerate inflation to their elusive two per cent target.
The figures come ahead of Friday’s release of second-quarter gross domestic product (GDP) data, which will likely show the economy expanded an annualised 1.4 per cent after contracting in the previous quarter.
“Consumption has emerged from a soft patch in the first quarter and will underpin economic growth,” said Takeshi Minami, chief economist at Norinchukin Research Institute. “Export growth is stagnating, so we may not see external demand drive the economy. But that will be offset by strong capital expenditure and improvements in consumption.”
Household spending fell 1.2 per cent in June from a year earlier, government data showed on Tuesday, marking the fifth straight month of declines. But the fall was smaller than market forecasts of a 1.6 per cent slide and a 3.9 per cent drop in May.
While spending on housing renovations fell, consumers spent more on beverages, air conditioners and eat-outs due partly to hot weather during the month, the data showed.
Households’ inflation-adjusted income rose 4.4 per cent in June, the biggest increase since July 2015, as a tightening job market pushed up temporary workers’ pay, the data showed.
Separate data showed workers’ real wages rose 2.8 per cent in June from a year earlier, accelerating from a 1.3 per cent increase in May and marking the fastest pace of growth since January 1997.
Signs of rising wages would be encouraging for the BoJ, which trimmed its inflation forecasts last week and blamed Japan’s entrenched deflationary mindset for keeping price growth subdued. —