Japan’s Inflation-Adjusted Wages in August

TOKYO (Reuters) – Japan’s inflation-adjusted wages fell in August after two months of increases during the summer bonus season, according to government data released on Tuesday. This decline may diminish the likelihood of the central bank raising interest rates soon.

Real wages in the world’s fourth-largest economy decreased by 0.6% in August compared to the same month last year, as reported by the Ministry of Health, Labour and Welfare. This followed a revised 0.3% increase in July.

Wages had shown improvement in June for the first time in over two years due to increased summertime bonuses; however, the labor ministry indicated that the impact of these special payments would decrease starting in August.

Summer bonuses rose 2.7% in August, compared to revised increases of 6.6% in July and 7.8% in June.

Sustained wage growth is essential for the Bank of Japan to consider another interest rate hike following its first increase in 17 years in March, followed by another in July.

While the central bank acknowledged in its quarterly report earlier that a rise in prices and wages was becoming widespread across Japan, it also pointed out concerns among small and medium-sized enterprises about the pressure on profits.

Nominal wages, which reflect average total cash earnings per worker per month, grew 3.0% to 296,588 yen ($1,999.11) compared to August last year, which is lower than a 3.4% increase in July.

Base pay (regular pay) also rose by 3.0%, while overtime pay, an indicator of corporate health, increased by 2.6%.

The consumer price index, used for calculating real wages and including fresh food prices but excluding owners’ equivalent rent, saw a rise of 3.5% in August, marking the highest increase since October last year.

($1 = 148.3600 yen)