Japan wages down most since 2015 as winter bonuses slide


Labour cash earnings slid 3.2% from a year earlier, weighed down by a drop in year-end bonuses, labor ministry data showed. Economists had predicted a bigger overall fall of 4.8% that would have been the worst reading since the 2009 financial crisis.

TOKYO: Japanese wages fell in December for a ninth straight month, declining the most since June 2015, as employers remained fearful of the profit outlook amid a global resurgence of the coronavirus.

Labour cash earnings slid 3.2% from a year earlier, weighed down by a drop in year-end bonuses, labor ministry data showed. Economists had predicted a bigger overall fall of 4.8% that would have been the worst reading since the 2009 financial crisis.

The smaller-than-expected drop follows a report showing household spending also fell less than expected in December, offering a slightly less dismal view of the spending environment for workers than had been assumed at the end of 2020.

Still, pay declines are likely to limit the extent of any rebound in consumer spending even after Japan lifts a state of emergency that is planned to cover the country’s main cities until March 7. Analysts see falling consumer spending as a key reason for the economy falling back into contraction this quarter.

So far, Japan’s companies have fired fewer workers than in many other major economies, keeping unemployment at a low rate of 2.9%, but one of the big tradeoffs has been steep cuts to bonuses.”

The underlying wage trend is likely to remain weak as companies prioritise protecting jobs, ” said economist Koya Miyamae at SMBC Nikko Securities Inc. “Without wage growth, inflation will be under downward pressures for a while, which validates the need for the Bank of Japan’s (BoJ) policy assessment.”

The BoJ is getting ready for a policy review next month to try to make its easing more sustainable. The pandemic has driven consumer prices back into negative territory and made it more likely that the bank will have to continue its asset purchases and ultra-low interest rates for an extended period. ─ Bloomberg

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