Japan's wages decline in February despite contraction in the labor market

In Japan, real wages fell in February, reflecting lower premiums and revised prior data, reflecting sluggish economic conditions in the world's third-largest economy.

According to data from the Department of Health, Labor and Welfare, real cash earnings, adjusted for inflation, declined 1.1% from one year to the next. in February. The revised figure for January was 0.7%, compared with 1.1% previously.

February's drop was largely due to a sharp 34.2% drop in special payments as companies reduced their premiums.

Labor income, adjusted for inflation, fell 0.8% after the revised January figures went from a 1.2% increase to a 0.6% decline. This is the biggest drop since June 2015. A survey of badysts conducted by Bloomberg forecast a rise of 0.9%.

Japan's unions have proposed smaller wage increases for 2019, suggesting that the country's increasingly severe labor shortages are unlikely to translate into higher wages for regular wage earners. . The slowdown in wage growth will disappoint the Bank of Japan, which hoped that higher wages would fuel consumption and inflation.

"The sudden drop in wage growth is meaningless as the unemployment rate remains close to its lowest level in 25 years. As such, a short-term rebound seems inevitable, "said Darren Aw, Asia Economist at Capital Economics.

He added that the disappointing figures were mainly due to the revision of the January figures, but that wage growth would likely remain below 1% and would make the Bank's 2% inflation target Japan "almost impossible to reach".