Japan's Real Wages: Updated June 13, 2024.

 

Japan's real wages fall for record 25th straight month in April

Article Source:  https://mainichi.jp/english/articles/20240605/p2g/00m/0bu/006000c

Ideas:

The cumulative effect of decreasing real wages, month after month, has got to be a major stress on many Japanese households.

Its been 25 months of declines, which means consumer spending or household spending in the Japanese economy is not going to improve much.

Companies might have increased wages, but inflation is still higher than what the wage were which again, means possibly not much spending in the Japanese economy.

Japanese households or Japanese consumers, eventually, if not already, are going to say enough is enough and begin to only buy the basics needed for their households.

Yes, the Bank of Japan could have should have increased the key rate a long time ago, but the BOJ kept saying there are just too many side affects to increasing the rate in Japan at this time. 

But, to be fair, what about the side affects for Japanese households and higher prices? Yes, if the key rate was increased many businesses might have had to pay higher business loan payments. 

And those already with existing loans would have had to pay even more interest, and there is the the possibility of housing payments and so on.

No one really pays attention to nominal wages as real wages are the key for Japanese households as nominal wages includes inflation and other factors.

So nominal wages increased for the 28th consecutive month, meaning inflation has increased for 28 months in Japan.

Not to keep talking about it, but this all started back in the early 2000's with the Toyota group deciding there would be no wage increases and then all other companies decide to do what the Toyota group did and ever since, then up to April of 2023, there were minimal wage increases in Japan.

Its understandable, back then as the Toyota group felt wages grown too much in Japan and many companies were worried about remaining competitive with Chinese companies which had lower wages.

But not the situation is much improved as wages in China have reached a level comparable to Japanese companies, or near comparable, but not completely.

It's understandable that large major Japanese companies can afford to pay higher wages, and its understandable that small and mid-size companies, just don't have the needed resources to pay the same wage increases as the large companies.

Because their is a labor shortage in Japan, at this time, many or some small Japanese companies might begin to lose employees to larger companies that pay higher wages, and if possible, it understandable for a Japanese household to want to move to a large company for better pay.

One of the challenges for small and mid-size companies is being able to pass-on their wage increases to the next in the supply chain, which might include large companies, but unfortunately, large companies might not like the idea that small companies are increasing their prices for wage increases.

For example large companies offered age increases of 5 percent or more and smaller companies could only offer wage increases of 3.62 percent. That doesn't sound like it that much of a difference, but over one year, with inflation it adds up overtime. 

The government subsidy program was a good idea, but the government can't do everything as even the government supposedly only has so much money in its budget.

Most likely inflation will remain high through the summer, and with the summer heat approaching energy and AC bills are going to be very high in Japan again this summer.

Probably mining and quarrying sectors are somewhat seasonal sectors and not operational every month of the year. As far as the construction sector goes, the companies in that sector maybe felt they had no choice but to increase wages, as if they didn't they might begin to either lose workers or not get new workers.

Even though wages might have increased, inflation most likely was much higher for many Japanese households even for those in the construction sector.

Just what is the percentage of full-time workers in Japan compared to part-time workers? Unfortunately, the number of part-time workers might have increased as many companies, not all but some, or many, are now mostly using par-time workers to reduce costs and improve the bottom line.

The service sector seems to be where many of the part-time workers are at, as many service type companies, to reduce costs, just use part-time workers these days. 

An economy can't exist only on part-time workers, but to be fair, maybe the companies feel they have no choice as they have to maintain their profits margins, and too many full-time workers would cut into their profit margins.

Service sector companies usually have very thin profit margins can't afford to hire too many full-time workers.

Have a nice day and be safe!