August - Wages Fail to Rise for First Time in Six Months

Oct. 4 (Bloomberg) -- Japan’s wages unexpectedly stagnated in August, failing to rise for the first time in six months, adding to concern the country’s consumers won’t be able to drive growth in place of slowing demand abroad.

Monthly wages including overtime and bonuses were unchanged from a year earlier at 274,232 yen ($3,288), the Labor Ministry said today in Tokyo. Barclays Capital had projected a 0.6 percent annual advance in pay, while Bank of America Merrill Lynch had forecast a 1 percent gain.

Today’s report adds to risks for an economic recovery already burdened by the effect of an appreciating yen on the nation’s exports, which grew the least this year in August. Deteriorating growth prospects mean the Bank of Japan, which begins a two-day meeting today, will probably add monetary stimulus this month, Goldman Sachs Group Inc. economists say.

“The rebound in wages after the steep drop in 2009 has been extremely slow,” said Yoshiki Shinke, senior economist at Dai-Ichi Life Research Institute in Tokyo. “We’re seeing more and more economic reasons for the Bank of Japan to ease policy.”

Overtime pay rose 10.8 percent from a year earlier, the eighth straight increase, as employers had staff work more hours to keep up with demand. Special pay, a category that includes bonuses, dropped 10.7 percent, according to today’s report.

Yen Trading

The government intervened in the foreign-exchange market for the first time since 2004 on Sept. 15 to protect the export- driven recovery, and the yen weakened to as low as 85.93 against the dollar on Sep. 17. The yen has advanced since then, trading at 83.55 at 12:58 p.m. in Tokyo today.

Amid signs of a faltering recovery, Prime Minister Naoto Kan unveiled a 915 billion yen ($11 billion) stimulus on Sept. 10 that government estimates say will create or sustain 200,000 jobs, and has instructed ministers to compile another support package to keep the recovery going. National Strategy Minister Koichiro Gemba said today that total will be about 4.8 trillion yen.

The central bank will probably tomorrow increase its 30- trillion yen credit program for lenders to encourage bank lending and reduce demand for yen, 14 of 17 economists surveyed by Bloomberg News said.

More Easing

“We would not rule out more extensive easing” than the expansion of the credit facility, Chiwoong Lee, an economist at Goldman Sachs Group Inc., said in a report. “We are seeing the start of deterioration in the real economy.”

The BOJ will in the coming months increase its annual planned purchases of government bonds to at least 35 trillion yen from 21.6 trillion currently, boosting buying of five- and 10-year bonds to cut corporate borrowing costs, said Hideo Shimomura, chief fund investor at Mitsubishi UFJ Asset Management Co.

The unemployment rate fell to 5.1 percent in August from 5.2 percent in July even as the number of those with work dropped, reflecting an increase in people leaving the workforce, data showed last week.

Growth in paychecks is unlikely to pick up because of deflation and a weakening recovery in factory output, Dai-Ichi’s Shinke said. Industrial production fell for a third month in August.


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