Japan Real Wage Increase: Updated August 9, 2024

 

Japan real wages log 1st rise in 27 months on higher summer bonus

Article Source:  https://mainichi.jp/english/articles/20240806/p2g/00m/0bu/017000c

Ideas:

Maybe, just maybe, its the beginning of the end, but a long end, to inflation in Japan and real wages finally outpacing inflation.

But its been many months of inflation more than than wage growth, its going to take time for Japanese households or families to feel the real affects of wage increases that outpace inflation.

However there might be some real hope as many have said the increase in wage affects wouldn't be seen until the summer period, which is now.

Actually wage declines started in the early 2000's with the Toyota Group refusing increase wages, and then all other big companies followed and its been very slow wage increases ever since that time.

Data watchers or trend followers, in the 21st century, can't rely on past dates for anything as companies makes moves and changes as they now see fit and of course everything revolves around the shareholder and not the company worker, like decades ago.

Some companies, maybe many companies, which are shareholder companies are very concerned about how much in bonuses they give to company workers and maybe some or many shareholders are always concerned about their shareholder earnings, and if companies give too much in bonuses it might affect the quarterly earnings.

The Bank of Japan is not going to rely only on the upbeat figures, as they are going to see if the Japanese economy has really grown, and if inflation is finally trending down.

While wage increases might be helping if the Japanese economy is still somewhat stagnant they might wait until the fall season to increase the key rate.

But yes, the weak Japanese yen is a major problem for some in the Japanese economy, and especially Japanese importers.

The real challenge or question is, if inflation is actually trending down and wages are trending up, what are Japanese consumers going to do, and consumer spending in the Japanese economy has been stagnant for a very long time.

While the current data seems to be positive, again, its not enough, as the real clue will be Japanese consumer spending in the economy or Japanese consumer sentiment, meaning, do Japanese consumers finally feel good enough to spend again in the Japanese economy,

Again, it might take until the fall to really see what Japanese consumer think and feel, but there is the summer heat wave in Japan which might deter Japanese consumers from going out and spending, but there is always online shopping which might increase during the summer months as more consumers will stay home and just shop online to maybe stay out of the heat, if they can afford to run their AC's.

But again, everything is up in the air, as again, the real test is consumer spending and wages increases as are they enough to help consumers get back to spending, or does their need to be one or two more wage increases for consumer to feel good and or inflation to really begin to trend down.

Its very good that companies finally gave wage increases, but its even better that finally part-time workers saw a significant wage increases. But lets be fair, part-time workers are always at the bottom of the worker ladder and they never get the best wages or benefits in the company ladder.

Many service companies and many small companies have very thin profit margins, which almost make it very hard for them to increase part-time wages as many service type companies rely on part-time workers only and they can't afford to have many full-time workers on their staff.

Its  quite possible, many Japanese households might be waiting for the Obon season to spend again, and they are just coming off the Golden Week period in early May, which usually is a big spending week in Japan.

There is also the possibility of consumer weariness in Japan as inflation and continued high prices as caused consumer sentiment, to weaken to the point of less and less Japanese consumers are spending now. 

And there is the continued summer heat as its been suggested that when the temperature in Japan gets above 35 C, Japanese consumers might actually spend less and not more, as summer spending is usually good, but not recently in Japan.

There is always going to be a lag in spending, as Japanese households maybe have to decide how much to save, how much to spend on their bills, and finally how much extra income do they have left to spend in the economy.

Japanese households, like everywhere, have limited budgets and they might decide to spend on this and not on this such as home expenses and or home repairs, as again, there is only so much income to go around.

Natural disasters, in Japan, is always a concern, as earthquakes and typhoons are a major challenge, always in Japan, like in 2019 when the Tokyo area was  hit with some major typhoons in a short period of time.

Japanese households, again like everywhere, will cut back when they can, and cutting back on utilities after the subsidies end is normal for consumers.

Durable goods, such as air conditioning units might be up in Japan, but the hot summer months are going to increase AC costs usage even higher and or some or many, if they can, are going to head to the underground train station malls and other places to reduce their AC usage this summer.

So there seems to be no end in sight, at least this summer as the hot summer months, which can easily be extended in September, and even October, as the heat just keeps on in Japan, and Japanese households have to figure out how to lower costs and at the same time stay cool in their homes.

Have a good day and be safe!