Japan’s companies cut bonus payments in July, leading to a surprise drop in total pay for workers. While this was the first fall in 14 months, previous gains have been weak and well below the level needed to generate stronger inflation.
Total cash earnings per worker, including base and overtime pay, dipped 0.3 percent from a year earlier to an average ¥371,808 ($3,390), the first fall in 14 months, the Ministry of Health, Labor and Welfare said in a preliminary report. Adjusted for inflation, total cash earnings slipped 0.8 percent.
Bonuses and allowances slid 2.2 percent to ¥110,156 for the first downturn in six months, thus squeezing the wages for the latest month, the ministry said.
Average base pay and other scheduled wages increased 0.5 percent, while unscheduled wages, including overtime pay, gained 0.1 percent, it said.
Total hours worked, including overtime, slipped 0.5 percent, while the total number of workers grew 2.8 percent, the ministry said.
The labor market is the tightest it has been in decades, but that hasn’t translated into sustained wage pressures.
Base wages for full-time workers haven’t risen more than 1 percent in any month over the last two years, and while part-time workers are seeing better per-hour pay, they are also working fewer hours.
A drop in summer bonuses weighed on overall cash earnings in July and winter bonuses are likely to be lower than last year, said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co. in Tokyo.
“Scheduled pay, which has a bigger impact on consumer spending, is rising only slowly and real wages will probably keep dropping for a while,” Kodama said. “That means consumer spending will struggle.”
Masaki Kuwahara, senior economist at Nomura Securities Co., said the pace of wage gains will also dent consumer spending.
“My conclusion is the pace of wage gains remains weak, weighing on consumer spending,” Kuwahara said. Weak summer bonuses were expected because they are based on corporate earnings a year ago, when the yen was rising, he added.
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