August 07, 2018

Japanese wages rise at fastest pace in over 21 years

Japanese wages rise at fastest pace in over 21 years

June saw a 2.8% increase in real wages which is the biggest gain Japan’s wages have experienced since reaching 6.7% in January 1997.

The increase is indicative of a prolonged economic recovery that has seen nominal cash earnings increase 3.6% year-on-year in June and high summer bonuses. Furthermore, due to a tightening job market, wages have increased for temporary workers at their fastest rate in three years.

Despite the increase in real wages however, in their article The labor market in Japan, 2000–2016, IZA authors Daiji Kawaguchi and Hiroaki Mori write that, “the gender wage gap remains substantial, although it has been shrinking. This reflects the prevalence among women of jobs with a fixed-term contract that often pay relatively low wages. In 2016 about 48.8% of female workers were employed under a fixed-term contract, compared with only 17.8% of male workers.”

Japanese business prospects also remain uncertain as fears of the US imposing auto tariffs on imports rise. Such tariffs would have a detrimental effect on Japanese exports, as chief economist at Norinchukin Research Institute, Takeshi Minami, commented: "Export growth is stagnating, so we may not see external demand drive the economy. But that will be offset by strong capital expenditure and improvements in consumption."

However, the spending on beverages, air conditioners, and eating-out has indeed increased with the hot summer weather. Consequently, the GDP data for the second quarter of 2018, released this Friday, is expected to show a 1.4% expansion.  

Read more articles about wages and the labor market.