Japan's Real Wages: Updated Nov. 8, 2023.

 Article Source: https://mainichi.jp/english/articles/20230808/p2g/00m/0bu/025000c

Article:

TOKYO (Kyodo) -- Japan's real wages in June fell 1.6 percent from a year earlier, declining for the 15th straight month, as salary increases failed to keep up with accelerating inflation, government data showed Tuesday.

The drop in inflation-adjusted wages reflected higher food, energy and other prices on the back of Russia's war in Ukraine, offsetting the impact of the sharpest growth in 30 years at this year's pay negotiations.

Ideas:

Many companies, both large, medium, and small all have been challenged because of inflation and their profit margins shrinking over the past several years.

So it's not a surprise. even though many companies did give higher wage increases than in the past, they didn't cover inflation completely.

And then there were the companies who weren't able to give any kind of wage increase as their profit margins have decreased dramatically over the past few years.

As wages might not have covered the increase in inflation, consume spending might be good now but in the future it begin to decrease as households begin to cutback on their spending.

Article:

Nominal wages, the average total cash earnings per worker, including base and overtime pay, rose 2.3 percent to 462,040 yen ($3,200), increasing for the 18th consecutive month, according to the Ministry of Health, Labor and Welfare.

"We will likely see the effect of wage increases by companies gradually," a labor ministry official said.

Ideas:

Nominal wages, wages with inflation included, does say anything about inflation, but if it were real wages we can see just how affect inflation has on households and their wages.

It is going to take some time to see the effect of wages on the economy, as households have to decide what to do with their new wages, regarding just how much to save and just how much to spend in the economy, and of course as inflation continues on in Japan. 

Yes, in a another article it said household saving had increased due to households not spending much during the pandemic, but just what was the savings rate, as inflation has taken its toll on households in and after the pandemic.

We might not see much of the effects or it will not be significant if inflation continues the have an effect on the Japanese economy in the future.

Article:

Major Japanese companies offered wage hikes of 3.58 percent on average at annual wage negotiations earlier in the year, the highest increase in three decades, in the face of repeated calls by Prime Minister Fumio Kishida for pay rises to cope with inflation.

Consumer inflation, however, accelerated by more than 4 percent at one stage this year and remains above 3 percent. The internal affairs ministry said last month that the rate was up 3.3 percent from a year earlier, driven by surging food and household goods prices.

Ideas:

Major Japanese companies might have had wage increases of 3.58 percent but what about the rest of the companies in Japan. How many of them gave increases but at a much smaller amount because their profit margins were just too challenged to give larger wage increases.

Not all employees in Japan were at large blue-chip type companies with good salaries and good benefits. As such many employees might still be feeling the effects of inflation as their wage increases or the lack of, didn't cover the effects of inflation.

Some might say or have said Japan is now out of its de-flation stage, but most likely it only at the beginning stage and has a long way to go to get rid of deflation, meaning it has a long way to go until consumer begin to spend like in the US, if ever.

Article:

Separate data showed inflation continued to pressure consumption in June, with the nation's household spending in that month down 4.2 percent from a year earlier, declining for the fourth consecutive month.

Households of two or more people spent an average of 275,545 yen, the Ministry of Internal Affairs and Communications said. On a nominal basis, household spending fell by 0.5 percent.

Ideas:

Household spending maybe continue to decrease as inflation continues on in Japan, as the expected wage increase have achieved much yet in terms of helping the economy grow.

It's quite reasonable and possible, Japanese households have spend a certain amount each month on household energy bills, rent, and other forms of bills and they don't have a lot of extra income or disposable income left over for extra spending.

Consumer spending has not been that much compared to the US. Consumer spending in Japan might only be about 50 percent of GDP while in other advanced countries it might be more that 60 percent.

Article:

By category, spending on furniture and home appliances such as air conditioners and washing machines plummeted 17.6 percent from a year earlier, while medical care expenditures plunged 8.5 percent, according to the internal affairs ministry.

"The removal of COVID restrictions by the government led to a decline of stay-at-home demand...at a time when prices are increasing," an internal affairs ministry official said.

In May, the country downgraded the legal status of COVID-19 to the same category as seasonal influenza, marking a major shift in its approach after three years of dealing with the novel coronavirus.

Ideas:

Japan has experience record high temperatures, as as such maybe many households have decided not to stay at home too much instead heading out to wherever to stay cool during the summer, as higher energy costs hit households too.

Medical care expenses might have decreased as less people went to the clinics or hospitals as the pandemic had ended as they didn't feel the need to go to the hospital.

The buying of durable goods is not a weekly, monthly, or even a yearly purchase and maybe this year Japanese consumers bought enough in previous years and here wasn't the need to buy any durable goods this year.

Have nice day and be safe!