Wage Overtakes Inflation

Growth of workers’ wage surpassed negative impact of inflation. According to the announcement of Ministry of Health, Labor and Welfare, the wage index in April marked 0.1% of growth from the level one year before, for the first time in these two years. Downward pressure of consumption tax hike seemed to have diminished as long as statistics matter. Now, economists are focusing on whether it is leading to active consumption.

Average monthly salary for one worker, including part-timers, amounted to ¥274,577, increasing by 0.9% from a year ago. Rise of commodity price in the same period was 0.8%, indicating surpass of wage. Workers for industry in research and development, real estate, utility supply, bank or insurance marked high growth in wage. Making clear contrast, manufacturers still suffered from low growth of wage, marking 0.5% decrease in the wage index.

While negative impact of consumption tax hike last year has yet been completely eliminated, industries such as electric appliances or carmakers have been active in raising workers salary, backed by historical surplus in its balance. Followed by shortage of labor, wage showed significant growth. Employment became stable and jobless rate in April was 3.3%, marking the lowest in these eighteen years.

To be precise, wage growth did not show fundamental improvement of Japanese economy. The announcement was about temporary data, leaving possibility of downward adjustment. Commodity price may be raised, if current tendency of cheap yen in foreign exchange reaches extreme level, causing excessive inflation. In that situation, families will defend themselves by negative attitude in shopping. Because temporary data tends to appear to be relatively high, it is possible that the surplus will be swallowed by price hike in final release.

Prime Minister Shinzo Abe has been asking employers to raise wage of workers. The data in April looked like that his economic policy has been getting certain achievement. But, the wage hike in April was led by extreme growth in some exporting corporation, helped by preferable foreign exchange. Mid-size or small businesses are still in hard situation brought by high cost in procurement of raw materials.

Some economists expect further growth in workers’ wage, backed by positive consequence of higher basic salary. Others are careful in taking optimistic view, closely watching international move in currency market. It would be too early to tell final evaluation on Abenomics.