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Japan’s inflation-adjusted wages increased for an eighth consecutive month in August, signaling continued improvement in household purchasing power and strengthening expectations that the Bank of Japan could pursue further interest rate hikes.
Real wages rose 1.5% in August from a year earlier, according to government data released Wednesday. While the increase remained solid, it slowed from a revised 2.0% gain recorded in July.
Average nominal wages, also known as total cash earnings, climbed 3.8% year-on-year to 311,364 yen ($1,969.66). That compared with a revised 4.3% increase in the previous month.
Regular pay, which includes workers’ base salaries, advanced 3.8% from a year earlier, matching July’s revised growth rate. Overtime earnings showed stronger momentum, rising 5.2% in August after a revised 4.5% increase in July.
Special payments, which mainly consist of one-time bonuses and can fluctuate significantly from month to month, were unchanged from a year earlier. That followed a revised 5.3% increase in July.
The inflation measure used by Japan’s labor ministry to calculate real wages remained at 2.2% in August, unchanged from July. Price growth was considerably softer than the 3.1% rate recorded during the same period a year earlier, helping nominal wage increases translate into stronger real income.
The latest Japan wage data could reinforce the Bank of Japan’s case for additional monetary policy tightening after the central bank raised its benchmark interest rate last month. Sustained increases in wages are closely watched by policymakers as they assess whether inflation can remain supported by stronger household incomes and consumer demand.
Meanwhile, inflationary pressures continue to build. Annual core inflation in Tokyo accelerated in September to its fastest pace in 10 months, according to data released last week.
The combination of rising real wages and firmer inflation could increase expectations for further BOJ interest rate hikes if wage growth and underlying price pressures remain resilient in the coming months.
