May 9, 2017 / 12:16 AM / 3 years ago

Japan real wages growth slowest in nearly two years, to chill spending

TOKYO (Reuters) - Japan’s March real wages fell at the fastest pace in almost two years, pressured by meager nominal pay hikes and a slight rise in consumer prices, posing a setback for Prime Minister Shinzo Abe’s attempts to revitalize the economy.

A businessman walks in Tokyo's business district, Japan January 20, 2016. REUTERS/Toru Hanai/File Photo

The wages figures back recent data showing household spending fell more than expected and core consumer prices rose at a slower-than-expected pace in March, suggesting an exit from the central bank’s radical quantitative easing program remains distant.

Inflation-adjusted real wages dropped 0.8 percent in March from a year earlier to mark their biggest rate of decline since June 2015, labor ministry data showed on Tuesday.

In nominal terms, wage earners’ cash earnings fell 0.4 percent year-on-year in March, also notching the biggest rate of decrease since June 2015.

The data underscores the fragile and patchy nature of Japan’s economic recovery. It also bodes ill for Abe, who has repeatedly urged companies to lift worker compensation to foster sustainable growth in the world’s third-largest economy through a virtuous cycle of increased household spending, higher business investment and production.

The drop in March nominal cash earnings and real wages partly reflected a pullback from the same period a year earlier, when wage growth was solid, a labor ministry official said. In March 2016, nominal cash earnings rose 1.5 percent on-year and real wages increased 1.6 percent.

“We need to look at the data for April onward. We can’t say by looking at just this month that the trend (in wage growth) has shifted,” the official said.

Businesses have been reluctant to raise wages despite a tight labor market. An overwhelming majority of Japanese companies said they will raise wages at a slower pace than they did last year, a Reuters poll found.

Regular pay, which determines base salaries, dipped an annual 0.1 percent, falling for the first time since May last year.

Overtime pay, a barometer of strength in corporate activity, fell 1.7 percent in March from a year earlier.

Special payments, such as bonuses, fell 3.6 percent in March on-year, also marking the largest drop since June 2015.

Special payments are generally small, so even a slight change in the amount can cause big percentage changes.

To view the full tables, see the labor ministry's website at: here

Reporting by Minami Funakoshi; Editing by Shri Navaratnam

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