By Tetsushi Kajimoto
TOKYO (Reuters) – Japan’s inflation-adjusted real wages fell in May for a record 26th straight month, highlighting the pain of inflation that is dampening household spending and complicating the central bank’s efforts to normalise monetary policy.
Real wages fell 1.4% in May, government data showed on Monday, faster than April’s 1.2% decline, as a weakening yen and higher commodity prices pushed up the cost of imports.
But there were some bright spots in the data.
Base pay, or regular pay, rose 2.5% year-on-year in May, the best pace since January 1993, around the time when Japan’s asset bubble burst.
The rise reflects the hefty increases agreed by labour and management at annual labour negotiations.
This year, Japanese firms have offered a 5.1% increase in monthly pay, a level unseen in 33 years.
Nominal wages, the average total cash earnings per worker, grew 1.9% to 297,151 yen ($1,850), accelerating from the previous month’s 1.6% and at the highest pace in 11 months.
In Japan, seven out of 10 workers are employed by small firms, which are struggling to pass on rising costs to their clients.
Wage hikes at firms with 30 or more employees outpaced inflation for the first time in 26 months, the labour ministry said, though when including very small firms with five or more workers, pay hikes still lagged inflation.
Overtime pay, a barometer of corporate strength, rebounded 2.3% in the year to May, the first increase in six months, the labour ministry data showed.
The Bank of Japan (BOJ) will highlight how pay increases are spreading in a report due later this month, sources have told Reuters, a trend that strengthens the case for a near-term interest rate hike.
But data on Friday showed household spending unexpectedly fell in May, while first-quarter economic output figures were unexpectedly and sharply downgraded on Monday, complicating the outlook for any central bank moves.
($1 = 160.6700 yen)
(Reporting by Tetsushi Kajimoto; Editing by Kim Coghill)
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