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JAPAN DATA: Firmer Earnings Data, Real Wages Remain Negative Y/Y Though

JAPAN DATA
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Japan labor earnings data was better than market forecasts. Nominal cash earnings rose 3.0%y/y, against a 2.7% forecast. The prior was revised down to 2.2% from 2.6% initially reported. In real terms, earnings were still negative at -0.3%y/y, but this was also better than the -0.6% forecast. Revisions saw the flat Oct outcome revised to a -0.4% fall. 

  • For the same sample base figures, cash earnings rose 3.5%y/y, against a 2.8% forecast (which was also the prior outcome). Cash earnings are off cycle highs (above 5%y/y) but remain very elevated by historical standards. Scheduled full time pay rose 2.8%y/y, in line with expectations, but slightly off Oct's 2.9% pace. Still this metric remains close to 2024 cycle highs.
  • In terms of the detail, bonus payments rebounded 7.9%y/y (from -2.2% in Oct), which helped the headline earnings result. Hours worked were -0.2%y/y, but we are up from recent lows of -2.7%.
  • The chart below plots real wages against real household spending. The trend is positive for real wages, albeit still negative in y/y terms and from a low base. The authorities will want to see this trend continue and spill over into positive real spending trends as we progress through 2025.
  • From a BoJ standpoint, the positive surprise today will be encouraging, but may not be strong enough to shift near term rate hike thinking. 

Fig 1: Japan Real Wages & Real Household Spending Y/Y 

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Japan labor earnings data was better than market forecasts. Nominal cash earnings rose 3.0%y/y, against a 2.7% forecast. The prior was revised down to 2.2% from 2.6% initially reported. In real terms, earnings were still negative at -0.3%y/y, but this was also better than the -0.6% forecast. Revisions saw the flat Oct outcome revised to a -0.4% fall. 

  • For the same sample base figures, cash earnings rose 3.5%y/y, against a 2.8% forecast (which was also the prior outcome). Cash earnings are off cycle highs (above 5%y/y) but remain very elevated by historical standards. Scheduled full time pay rose 2.8%y/y, in line with expectations, but slightly off Oct's 2.9% pace. Still this metric remains close to 2024 cycle highs.
  • In terms of the detail, bonus payments rebounded 7.9%y/y (from -2.2% in Oct), which helped the headline earnings result. Hours worked were -0.2%y/y, but we are up from recent lows of -2.7%.
  • The chart below plots real wages against real household spending. The trend is positive for real wages, albeit still negative in y/y terms and from a low base. The authorities will want to see this trend continue and spill over into positive real spending trends as we progress through 2025.
  • From a BoJ standpoint, the positive surprise today will be encouraging, but may not be strong enough to shift near term rate hike thinking. 

Fig 1: Japan Real Wages & Real Household Spending Y/Y 

Keep reading...Show less