Wages rising in Japan but inflation eats away at consumer gains

TOKYO

Wages are rising in Japan more than they have in decades, at least for some workers.

But so are prices, leaving many people feeling they must scrimp more than ever.

In May, the consumer price index was up 3.2 percent from a year earlier, well above the central bank’s target of about 2 percent.

That’s great news for policymakers trying to get the world’s third largest economy out of the doldrums by keeping credit super cheap to spur demand and push prices higher.

But a government survey of companies with five or more employees found real wages, taking into account higher prices, fell 3 percent from the a year earlier in April, marking the 13th straight month of declines.

Although all the major companies have raised wages this year, with large labor union members landing a 4 percent hike, the highest in 30 years, a quarter of small and medium-size businesses — employers of more than two-thirds of all workers — gave no pay raises, according to the think tank Tokyo Shoko Research.

Japanese workers make less across the board than their counterparts in the U.S. and Europe. 

Average pay in Japan is about three-fourths of the OECD average of about $51,000. Hourly rates for workers in many Tokyo service jobs average about 1,300 yen ($9.30) an hour, up from the previous 1,000 yen ($7.10) an hour. They're lower in most of the country.

Wages have languished since Japan’s financial bubble burst in the 1990s, and the economy has stagnated. Employers held back on wage increases and risky investments but largely avoided mass layoffs, notes Hideo Hayakawa, a senior fellow at The Tokyo Foundation for Policy Research, an independent think tank.

“The economy is gradually starting to move, but we don’t know yet if things will work out so wage increases can continue into next year,” Hayakawa said.