Mon, Apr 15, 2024

Japanese Workers’ Real Wages Continue to Decline

In November, Japanese workers experienced their 20th consecutive month of declining real wages. Real wages refer to the income adjusted for inflation, representing the actual purchasing power of workers. This trend has raised concerns about the overall economic health of Japan and its potential impact on the livelihoods of its citizens.

Real Wages Fall Amidst Wage Negotiation Season

GBPJPY

GBPJPY is moving in Ascending channel and market has reached higher high area of the channel

The continuous decline in real wages is particularly concerning as it coincides with the annual wage negotiation season known as shunto in Japan. During this period, labor unions and employers negotiate wage increases for workers. The sustained decrease in real wages puts additional pressure on these negotiations as workers seek compensation that can keep pace with the rising cost of living.

Factors Contributing to Wage Decline

Japanese Economy

A significant factor contributing to the wage decline was the sharp contraction in special payments, which provide early insights into the winter bonuses that companies pay to their employees. However, it’s essential to note that this indicator can be volatile during the year-end period, making it challenging to draw definitive conclusions about bonus trends based on November’s data alone.

Mixed Signals in Wage Components

GBPJPY 4H

GBPJPY is moving in box pattern and market has reached resistance area of the pattern

While the overall growth in nominal pay was minimal in November (0.2%), there were variations in different components of wages. For instance, regular or base salary increased by 1.2%, indicating some stability in core compensation. Overtime pay also showed a modest year-on-year gain of 0.9%, suggesting that business activity was relatively steady.

Wage Negotiations and Inflation

The shunto season holds substantial importance in Japan as it sets the tone for wage growth for the year. Labor unions, such as Rengo, have expressed their intentions to seek substantial pay increases, aiming to cushion the impact of higher living costs caused by inflation. The outcome of these negotiations can significantly influence the overall inflation rate and consumer spending.

Bank of Japan’s Policy Implications

Bank of Japan governor Kuroda said it is time for support for corporate funding

The Bank of Japan closely monitors wage trends because they are a pivotal factor in determining its monetary policy decisions. The recent data will influence the central bank’s approach to achieving its 2% inflation target and the potential normalization of its monetary policy. Policymakers are keenly observing whether wages and prices will align in a virtuous cycle.

Challenges in Achieving a Virtuous Cycle

A virtuous cycle refers to a scenario where wage increases drive consumer spending and, in turn, lead to higher prices, contributing to economic growth. While some data points indicate resilience in compensation, the full realization of this virtuous cycle has yet to materialize. Policymakers and economists are closely monitoring these developments as they anticipate the timing of potential policy changes.

Government Initiatives to Boost Wages

GBPJPY D

GBPJPY is moving in Ascending channel and market has rebounded from the higher low area of the channel

Prime Minister Fumio Kishida’s call for robust wage increases has been accompanied by government initiatives. The draft budget includes a ¥1 trillion fund aimed at encouraging pay hikes and alleviating the impact of inflation on citizens. Several companies have already announced plans to increase wages as they compete for talent in a tight labor market.

Looking Ahead to Wage Negotiations

Japanese yen sends higher more against US Dollar

As the shunto negotiations progress and companies make wage decisions, the landscape of Japanese real wages will become clearer. The Bank of Japan’s upcoming policy decisions and economic outlook will depend on the outcome of these negotiations and the broader economic context. The government’s efforts to stimulate wage growth and mitigate inflation’s impact will also play a significant role in shaping the future of Japan’s economy.


Don’t trade all the time, trade forex only at the confirmed trade setups.

Get more confirmed trade setups here: forexgdp.com/buy/

Leave a Reply

Your email address will not be published. Required fields are marked *

Also read

85% Offer for Signals

X