July Saw Real Pay Increase In Japan Due To Substantial Bonuses

According to government data released on Thursday, Japan experienced a positive trend in July as inflation-adjusted wages increased for the second consecutive month. 

This rise was attributed to a boost in summertime bonuses, indicating a potential improvement in the country’s economic landscape and offering a glimmer of hope for workers amidst ongoing challenges.

Real wages in Japan grew 0.4 per cent in July

According to data from the labor ministry, real wages in the fourth-largest economy in the world increased by 0.4% in July, which was less than the 1.1% growth in June, when it went positive for the first time in 27 months.

The BOJ rate hike’s timing is primarily determined by wages. BOJ Governor Kazuo Ueda has reaffirmed that without widespread salary rises to go along with price hikes, inflation will not be able to sustainably meet the central bank’s 2 percent target.

An official in the labor ministry stated that the reason for the decrease in real pay growth in July was that fewer companies gave bonuses in that month as opposed to June. Following a revised 7.8% increase in June, special payments increased by 6.2% in July.

Japanese firms agreed on an average pay increase of 5.10 per cent per month

According to the official, since most businesses offer summer bonuses in June and July, special pay’s contribution to increasing real salaries would stop in August.

The official said “From August and thereafter monthly wages (composed of regular and overtime payment) will be a deciding factor” in stabilizing real wage growth.

Nominal wages increased by 3.6% to 403,490 yen ($2,785.19), the fastest pace of growth since January 1997. Base pay rose by 2.7%, the fastest growth in almost 32 years, due to labor-management wage talks. 

Overtime pay, reflecting corporate Japan’s strength, fell 0.1% in July after a revised 0.9% gain in June.

This year, Japanese companies decided to raise salaries by an average of 5.10 percent each month, which is the largest pay growth in 33 years.

Officials use the consumer price index, which includes fresh food costs but does not include owners’ equivalent rent, to determine real earnings. This month, it increased by 3.2%, somewhat less than the 3.3% growth the previous month.

The official said “Prices are still at a high level, so if prices subside a little more, real wages may continue to be positive,”

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