Japan's Base Salary Growth Reaches 32-Year High

TOKYO (Reuters) – Japan's base salary grew at a 32-year-high pace in October, boosting real wages after two months of decreases and offering support for the prospects of a central bank rate hike this month.

The Bank of Japan must scrutinize various data at its Dec. 18-19 rate review, said dovish board member Toyoaki Nakamura on Thursday, as the market remains split about the timing of Japan's next interest rate hike between December and January.

Base salary, or regular pay, rose 2.7% in October, marking the fastest increase since November 1992, according to labor ministry data, as more companies set higher salaries after major firms agreed to an average 5.1% raise during spring wage talks.

Overtime pay, a barometer of business strength, rebounded to 1.4% growth from a revised 0.9% decrease in the previous month.

Combined, nominal wages, or a worker's average total cash earnings, grew 2.6% to 293,401 yen ($1,955) in October.

The inflation rate used for wage calculation, excluding owners' equivalent rent, was 2.6%, its slowest in nine months. This led to inflation-adjusted real wages, a key indicator of consumers' purchasing power, remaining unchanged in October from a year prior, compared to a revised 0.4% drop in September and 0.8% decline in August.

Opposition lawmakers pressed the government and the BOJ to aim for positive real wage growth after the ruling bloc lost its lower house majority in the October general election.

BOJ Governor Kazuo Ueda told the Nikkei newspaper last week that the timing of the next interest rate hike was "approaching," as the economy aligns with the central bank's forecasts. However, Jiji news agency reported a growing cautious view among BOJ policymakers towards an early hike, adding uncertainty about a December hike.

($1 = 150.1500 yen)