MNI BRIEF: Japan July Real Wage Drop Widens to -2.5%

The y/y drop of inflation-adjusted real wages, a barometer of household purchasing power, widened to 2.5% in July from a 1.6% fall in June as the consumer price index rise remained high, data released by the Ministry of Internal Affairs and Communications on Friday showed.

Real wages stayed in negative territory for the 16th straight month in July, illustrating that household income has not caught up with price rises, particularly impeding low-income household and elder spending.

The BOJ has noted that price rises have hit private consumption. Pent-up demand has continued to support spending linked to services, but goods spending remains weak.

Total CPI minus imputed rents rose 3.9% y/y in July after rising 3.9% in June. Total cash earnings, or nominal wages, posted a 1.3% y/y gain in July following 2.3% in June. Scheduled earnings rose 1.5% y/y in July following a 1.4% gain in June. Overtime pay rose 0.5% y/y in July, slowing from 1.9% in June, and bonuses and other special pay rose 0.6% y/y in July following June’s 3.5% rise.