Japan Real Wages Fall: Updated April 30, 2024.

 

Japan real wages fall for 2nd straight year amid rising inflation

Article Source:  https://mainichi.jp/english/articles/20240206/p2g/00m/0bu/015000c

Ideas:

Real wages are wages with inflation and basically the wage increases in April of 2023, wasn't enough to cover the continuous increases in inflation each month.

Wage increases usually only happens in April, the beginning of the new business fiscal year in Japan, but inflation is a monthly situation and there is not just one time inflation increases but basically every month.

The 2014 consumption tax or sales tax situation was a situation in Japan, that saw consumer spending decrease significantly in April of 2014, but consumer spending did rebound as consumers and households got used to the sales tax increase.

Household spending or consumer spending is always a challenge for the Japanese economy, as maybe Japanese consumers/households are not the like the free-spending US consumers, as maybe they are more inclined to save instead of spend.

Nominal wage increases, including overtime pay might sound good, but it also includes inflation increases, which gives it an inflated picture of what is really going on.

Its quite possible, because of energy costs and raw material cost increases maybe small and midsize companies just don't have room in the profit margins to offer wage increases similar to what large companies can offer.

Most likely, like most economies, most workers don't work for the large name-brand companies but instead work for the millions of small and midsize companies. Large companies, especially the name-brand companies, these days, get all the news but, again, most workers in every economy don't work for large companies.

If small and midsize companies begin to see enough large companies increasing wages, and then if they begin to hear that some small and midsize companies too, are increasing wages, it become a multiplier effect situation and snow-ball throughout the rest of the Japanese economy.

The reason is Japan is facing a labor shortage and companies, large, midsize, and small need to increase wages to get the best talent possible. If they don't increase wages as an incentive, they are not going to get anyone to work for their company.

Of course, unfortunately, the regional areas, with smaller population bases are going to suffer the most, as many young workers, educated and less-educated don't want to work in regional areas but instead want to work in Tokyo, Osaka, Kyoto, Nagoya, and so on.

December alone, because of the double holiday period in Japan, meaning the Christmas period and the end of the year period, might have seen prices increases during those times, and at as the same, real wages decreased due to price increases.

Some might say a real percent drop of 2.6 percent is not much, but at the same time its more of an average and maybe most likely for some households consumer spending decreased a lot more than 2.6 percent and the upper-income group were probably around the 2.6 percent average, and the lower-income group probably decreased spending even more than 2.6 percent.

Not to get too much on a rant here, but its unfortunate that Japanese students have to go to after-school programs for extra study just to get into the so-called prestigious elementary, middle, and high school, and of course universities.

Its even worse in South Korea and China, where students spend up to midnight taking extra study classes.

Again, maybe most households spent less than the average mentioned here, or maybe many lower-income households spent much less and of course maybe the upper-income groups spend much more.

Its sad that parents have to spend on educational expenses just to keep up with the so-called whomever in society. Think of the stress children/students have to go through just to get into a so-called prestigious school, just to make them or their parents feel good.

Food for the average household might be about 30 percent of household spending, but for the lower-income groups its probably much more than 30 percent, as they have to use more of their limited income on food.

And the same for the upper-income groups that maybe use less than 20 percent of their income on food.

Maybe many household goods are not an everyday every week or even an every month purchase, and as they see the prices increase they might decide to just wait.

Here in South Korea there are still some people wearing masks but its much less than a year ago, but everyone wears one at a hospital or a pharmacy.

Its natural that people want to get out and about instead of just staying at home like during the pandemic.

But its interesting that household spending decreased in December, as it might have been related to price increases in December and consumers/households didn't want to spend that much during the holiday period or the New Year period.

Private consumption, consumer spending, or household spending is always a major challenge for the Bank of Japan and the Japanese economy, as it seems Japanese consumer just don't spend as much as US consumers.

For example December is a major shopping and spending month in the US, and many companies finally get into the black for the first time all year.

But maybe Japanese households or consumers, despite all of the Christmas sales, advertisements and so on in Japan, don't just spend like, again, US consumers.

Have a nice day and be safe!