Japan June real wages rise the most in 6 years, but there’s a catch

By Minami Funakoshi

TOKYO (Reuters) – Real wages in Japan rose the most in almost six years in June, data showed on Friday, but the gain was exaggerated by the effect of falling prices, highlighting the government’s struggle to pull the economy out of deflation.

Prime Minister Shinzo Abe has sought to lift the economy out of two decades of stagnation through a three-pronged mix of big government spending, ultra-loose monetary policy and structural reforms.

While pay increases and higher spending are key for the success of Abenomics, wage gains inflated by low prices may not spur private consumption, which remains sluggish.

Real wages, which are adjusted for inflation, jumped 1.8 percent in June from a year earlier, the highest level since September 2010. In the previous month, they rose 0.4 percent on-year, revised data from the labor ministry showed.

“Real wages grew 1.8 percent because the core consumer price index was negative 0.5 percent in June,” said a labor ministry official, adding that gains in nominal cash earnings also helped.

Wage earners’ nominal cash earnings rose 1.3 percent in June, the biggest gain in three months. In May, they dipped 0.1 percent on-year, revised data showed.

Nominal cash earnings increased because summer bonuses pushed up special payments, the official said.

Special payments jumped 3.3 percent in June, compared with a revised 1.5 percent gain in May. Because special payments are generally small, even a slight change in the amount can cause big percentage changes.

Regular pay, which determines base salaries, increased only a scant 0.1 percent.

Overtime pay – a barometer of strength in corporate activity – fell 0.1 percent in June, down from a revised 0.5 percent gain the previous month.

(Editing by Kim Coghill)