Japan's Real Wages:

 Article Source: https://mainichi.jp/english/articles/20230207/p2g/00m/0bu/024000c

Article: 

TOKYO (Kyodo) -- Japan's real wages dropped 0.9 percent in 2022 from the previous year for the first decline in two years amid rising inflation, government data showed Tuesday, while household spending continued recovering moderately following the coronavirus pandemic.

The slide in inflation-adjusted wages signaled that food, energy and other price increases, driven largely by Russia's invasion of Ukraine, outpaced pay hikes, despite Prime Minister Fumio Kishida calling on business leaders to raise wages in line with inflation to create a positive growth cycle.

Nominal wages, or the average total cash earnings per worker including base and overtime pay, grew 2.1 percent to 326,157 yen ($2,400) a month, the second straight yearly increase and the sharpest gain in 31 years, the Ministry of Health, Labor and Welfare said in a preliminary report.

Ideas:

A decrease of 0.9 doesn't seem big but for some families it might be just enough where everything now is expensive for them.

Inflation is very much individual as it might not affect every family the exact way, depending of course on expenses, income, and spending habits.

I'm not so sure we can blame everything on the Ukraine war situation. I think the inflation situation has been ongoing for along time, even before the Ukraine war.

Nominal wages might have grown but of course the inflation and real wages are the real determinant in the economy.

Article:

In December alone, average real wages marked the first rise in nine months, helped by higher bonuses and corporate allowances to ease the impact of inflation.

But the ministry sees the rebound as temporary, with one of its officials saying that "real wages will continue to decline for the time being."

Separate data showed the country's average household spending in 2022 rose a real 1.2 percent, increasing for the second consecutive year, as people have gradually resumed activities in the absence of recommended restrictions on movement due to COVID-19.

Ideas:

Yes, as December might be an increase in bonuses but its not a monthly situation so its only a once or twice a year situation.

Real wages is highly reflective on what is happening with inflation. Real wages might grow but if inflation continues to increase then most likely gain almost be a net gain in real wages for the year.

An increase in household spending is a good sign that people are getting back to their normal activities but for how long as inflation might determine how much people can get back to the 2019 pre-pandemic level.

Article:

Households of two or more people spent an average of 290,865 yen per month last year, the Ministry of Internal Affairs and Communications said.

By category, educational and entertainment spending rose 8.2 percent on strong travel demand. Spending on transportation and communication grew 6.0 percent with more people using trains and airplanes, according to the data.

Compared with the pre-pandemic level of 2019, household spending in 2022 fell 3.5 percent. The rate of decline has shrunk from the 4.6 percent fall in 2021.

Ideas:

For now people are maybe happy to be out and about again, but for some, maybe the inflation situation might be too much for them.

So while 8.2 percent sounds good but what would it be without the inflation situation .

And as companies now see the use of Zoom, Microsoft Teams, and Google Meet for business meetings, maybe there won't be a many business people traveling like in 2019.

Household spending was bound to decrease as inflation continues to be a constraint for many households.

Article:

"The impact of the coronavirus is diminishing," a ministry official said.

Household spending in December alone slid 1.3 percent from a year earlier to 328,114 yen for the second consecutive month of decline as people spent less on food, it said.

The data is a key indicator of private consumption, which accounts for more than half of the country's gross domestic product.

Ideas:

Private spending or private consumption is a major indicator and has never reached the level of other advanced major economies. While Japan might be a 50 percent of GDP related to consumer spending other advance economies are at 60 percent or more.

But again there might be some positives and negatives to the level of spending. For example Japan might have a higher savings rate compared to many advanced economies.

The negative of course is maybe the Japanese economy never reaches its fullest potential in terms of consumer spending, but in other countries maybe they spend too much and don't save enough too.

Have a nice day and be safe!