Japan wages data shows that ‘real’ wages, ie after adjustment for inflating prices, fell in September.
September Labour Cash Earnings+2.8% y/y
- expected +3.0%, prior +2.8%
Real Cash Earnings -0.1% y/y, falling for the second month in a row
- expected +0.1%, prior –0.8%
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Real wages are a critical indicator of consumer purchasing power in Japan, falling again is not good news. At least the drop wasn’t as bad as the awful result in August.
Wages play a crucial role in determining when the Bank of Japan might raise interest rates again. The BOJ has stated that widespread pay increases need to accompany price growth for inflation to sustainably reach its 2% target. Last week, BOJ Governor Kazuo Ueda noted that wages and prices are progressing as anticipated, indicating that the conditions for raising borrowing costs further are aligning.