Japan’s Consumer Real Wages Grew for The First Time in March

Japan’s Inflation on consumer real wages adjusted higher in March for the first time in since December as the government data supports the gradual increase of salaries which could boost consumer spending.

The data will encourage BOJ to accelerate inflation as it is having a hard time in reaching the two percent target amid slow wages than hinders consumer spending. Most of the market players foresee the central bank not to rush in easing out on its massive monetary stimulus.

Inflation remains muted despite the aggressive monetary easing for five years that causes companies to share their record profits with workers which induced the BOJ to adjust the period given to reach the two percent inflation target.

On Wednesday, the labor ministry data exhibited growth in real wages of 0.8 percent in March compared a year earlier then returned to 0.8 percent annual decline last month.

The tight labor market is generating cost pressures which are apparent. However, “the upshot is that policy tightening remains a distant prospect.”, said by the senior Japan economist at Capital Economics, Marcel Thieliant.

His forecast figure on jobless rate is estimated to be 1.5 percent compared to the current value of 2.5 to be on par with the wage growth in reaching the two percent inflation goal of the central bank.

The labor market may not tighten in the future with the planned sales tax hike of 10 percent from the current rate in October 2019 that could lessen the domestic demand.

The gradual increase in nominal wages remains to be the trend, commented by a ministry official whereas, the nominal cash earnings climbed to 2.1 percent year-on-year in March, as the quickest annual gain since June 2003. Then, this was revised to 1.0 percent gain in February.

A huge part of the monthly wages, particularly the regular pay rose to 1.3 percent for the year until March with the biggest gain since July 1997. The special payments jumped to 12.8 percent since more firms give end-of-the-year bonuses to their employees.

Meanwhile, overtime pay acts as the indicator of corporate activity strength, climbed to 1.8 annual rate in March compared to the revised figure of 0.4 percent rise in February.

Most Japanese companies increase wages alongside the spring negotiations with unions, which support a rate hike for the fifth year beginning on April 1. Whilst, many firms are against the request of  Prime Minister Shinzo Abe in increasing the pay by 3 percent or more.