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Real Wages Surge Into Positive Territory, But Spending Still Negative

JAPAN DATA
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June wages data mostly strongly surprised on the upside. Headline labour nominal cash earnings were +4.5%y/y, against a 2.4% forecast and revised 2.0% gain in May. Real cash earnings were +1.1% y/y, against a -0.9% forecast and prior -1.3%. This is the is the first positive print for real wages since Q1 2022.

  • The same sample base figures were a little more mixed though. Cash earnings surged 5.4%y/y, against a 3.5% forecast and 2.6% prior. Scheduled pay was slightly softer than forecast at +2.7% y/y (2.9% forecast).
  • Looking at the detail, special payments rose 9.1% y/y on a same sample basis, boosting cash earnings. Bonus payments were up 7.6%y/y. Other same sample base figures were little changed from May.
  • This will be the watch point going forward, as the authorities aim for continued positive real wage growth. Still, scheduled same sample base pay hit fresh cycle highs in y/y terms, with recent annual wage negotiations continued to aid this backdrop.
  • Elsewhere, hours worked fell -2.8%y/y, while employment was +1.1% y/y.
  • The better wage outcome didn't boost household spending in June, which fell -1.4% y/y in real terms, against a -0.8% forecast.
  • The Japan authorities will be hopeful the positive real wage trend translates into better real household spending outcomes. The chart below overlays the two series, with household spending the white line.

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

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June wages data mostly strongly surprised on the upside. Headline labour nominal cash earnings were +4.5%y/y, against a 2.4% forecast and revised 2.0% gain in May. Real cash earnings were +1.1% y/y, against a -0.9% forecast and prior -1.3%. This is the is the first positive print for real wages since Q1 2022.

  • The same sample base figures were a little more mixed though. Cash earnings surged 5.4%y/y, against a 3.5% forecast and 2.6% prior. Scheduled pay was slightly softer than forecast at +2.7% y/y (2.9% forecast).
  • Looking at the detail, special payments rose 9.1% y/y on a same sample basis, boosting cash earnings. Bonus payments were up 7.6%y/y. Other same sample base figures were little changed from May.
  • This will be the watch point going forward, as the authorities aim for continued positive real wage growth. Still, scheduled same sample base pay hit fresh cycle highs in y/y terms, with recent annual wage negotiations continued to aid this backdrop.
  • Elsewhere, hours worked fell -2.8%y/y, while employment was +1.1% y/y.
  • The better wage outcome didn't boost household spending in June, which fell -1.4% y/y in real terms, against a -0.8% forecast.
  • The Japan authorities will be hopeful the positive real wage trend translates into better real household spending outcomes. The chart below overlays the two series, with household spending the white line.

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

Keep reading...Show less