TOKYO (Reuters) – Japan’s inflation-adjusted wages rose for a second straight month in July thanks to a rise in summer bonuses, government data showed on Thursday.
Real wages in the world’s fourth-largest economy rose 0.4% in July, slowing from 1.1% growth in June, when they turned positive for the first time in 27 months, according to data from the Labor Department.
Wages are the key to how quickly the Bank of Japan can raise interest rates. BOJ Governor Kazuo Ueda has said broad wage increases must be matched by rising prices to sustainably keep inflation at the central bank’s 2% target.
The slowdown in real wage growth in July was mainly due to fewer companies paying bonuses that month than in June, a Labor Department official said. Special payments, including bonuses, rose 6.2 percent in July, following a revised 7.8 percent increase in the previous month.
Because most companies pay summer bonuses in June and July, the contribution of special payments to real wage growth would disappear after August, the official said.
“From August onwards, monthly wages (comprising fixed and overtime hours) will be a decisive factor” in anchoring growth in real wages, the official said.
Nominal wages, or average total cash earnings per worker, rose 3.6% to 403,490 yen ($2,785.19), compared with a 4.5% increase in June, when it was the fastest growth since January 1997.
The base wage, or regular pay, rose 2.7%, marking the fastest pace of growth in nearly 32 years and reflecting the results of wage negotiations between employers and workers this spring. Overtime pay, a barometer of business strength, fell 0.1% in July after growing 0.9% in June.
Japanese companies have agreed to raise monthly salaries by an average of 5.10 percent this year, the biggest wage increase in 33 years.
Meanwhile, the consumer price index, which government officials use to calculate real wages (which includes the price of fresh produce but excludes the rents that owners pay), rose 3.2%, down slightly from the 3.3% increase in the previous month.
“Prices are still at a high level, so if prices fall a bit further, real wages could remain positive,” the official said.
($1 = 144.8700 yen)
(Reporting by Satoshi Sugiyama; Editing by Miral Fahmy)
