Japan Real Wages: Updated October 17, 2024

Japan real wages log 1st fall in 3 months amid continued price rise

Article Source: https://mainichi.jp/english/articles/20241008/p2g/00m/0bu/004000c

Ideas:

Wages increases in Japan are good and very much needed, but a 5% increase in wages is one time situation, usually in April, but inflation is not a one time situation as it can increase anytime as it as in Japan a lot since the pandemic.

Japanese households saw marked increase in June, but after June reality set in with more inflation after that which might have made the wage increase moot meaning the higher purchasing power only lasted a few months.

A 0.6 percent drop in real wages is really not that much, but for some it might a challenge to keep their heads above water as inflation continue to increase, but yes, at a slower rate.

Unfortunately, globally, just before elections politicians always make a lot of noise about what they are going to do, but in reality, some or many always do something different, as the situation in office is always different than what they can really do.

Consumer spending in Japan is never where is should be, as Japanese consumers just don't spend like US or even EU consumers, as they are more savers. In itself that's not a good or bad thing  but different cultures do different things, as the average Japanese consumers just doesn't go on big spending sprees like maybe in the US.

There is a definite labor shortage in Japan now, as there was recent article about some/many companies going bankrupt because they couldn't find the workers they needed because they were unable to meet the new demands of workers who want higher wages.

Price increases might be slowing, but are they slowing enough so that the average Japanese consumer can feel anything good from the recent wage increases.

Nominal wages are just wages including inflation, so they really don't mean much for the average consumer.

Subsidies are good but they shouldn't be depended on for a long time as they are meant to be a short-term help, but the market, if all possible. should be able to control inflation, which it hasn't in Japan for a long time.

The average wages of 3.0 was good, but the problem is inflation continues to increase every month, for example 3.5 in August and 3.2 in July etc. 

So even though Japanese workers see an increase in wages, usually just once in April, inflation continues to increase every month. Bonuses are good but they don't happen every month usually just twice a year in Japan.

So, again,  a wage increase of 3.0 is good, but inflation increased 3.5 and 3.2 respectively, and that just the months shown here, as we most likely it was the same or similar in other other months too.

Nominal wages really don't mean much as its real wages that are important. Nominal wages are wages not adjusted to inflation, so inflation might be part of the nominal wage.

Household spending or consumer spending is never where is should be in Japan. And as inflation continues to grip the Japanese economy, consumers in Japan, as anywhere, continue to cutback on their spending.

Of course maybe the hot summer months might have had something to do with the decrease in spending as maybe consumers didn't go out as much, as or they went to the malls to get out of the heat, but still didn't spend that much.

The typhoon situation in Japan is always going to reduce some economic activity, and this season was no different. And then add in the earthquake advisory and that made people even more cautious about what do to. 

Household spending supposedly makes up about 50 percent of Japan's GDP, but in reality, Japanese consumers don't seem to be spending that much since the pandemic as inflation seems to have curbed spending, and not even after the pandemic or even before the pandemic Japanese consumers haven't been spending like they do in the US or in the EU.

Japanese households have always been more savers than spenders as saving is a big part to the Japanese culture, but for Japan to get out of its current stagnation, there needs to be a better balance and not just all savings but some spending too in the Japanese economy.

Have a nice day!