Wages in Japan Growing Slower

Japan's wages grew at the slowest pace in five months in May, suggesting that households will continue to reduce spending as inflation rises faster than workers' paychecks. Monthly wages, including overtime and bonuses, climbed 0.2 percent from a year earlier to 275,815 yen, according to the Japanese Labor Ministry. Due to the impact of inflation this becomes a 1.2% fall in real terms.

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Households cut back their spending at the fastest pace since September 2006 in May, as inflation surged to a decade high. A weakening job market has also helped push consumer sentiment to a six-year low as consumers face higher energy and food prices.

Manufacturers worked fewer hours in the month, which reduced their overtime pay and the overall wage figure, according to Shunichi Ando, head of the Labor Ministry's statistics division. Overtime hours at manufacturers fell 3.9 percent in May, not far from the 4.1 percent drop in April, the biggest decline in six years.

The full-time workforce grew by 1.7 percent, slower than April's 2 percent increase, while the number of part-timers was up 1.7 percent from 1.2 percent in April. Slowing factory output prompted the government to downgrade its assessment of production for the first time in six months in May. Industrial production fell in March and April.

The Tankan index of manufacturer sentiment which was also published this morning confirmed this general negative impression, with the idex sliding to 5 points in June from 11 in March. This was a third quarterly decline, the Bank of Japan said today in Tokyo. Large companies forecast profits would drop 7 percent in the year ending March 31, compared with a 0.3 percent increase predicted three months ago.

The yen traded at 106.10 per dollar as of 12:40 p.m. in Tokyo from 106.15 before the report. Japan's currency has now weakened 4 percent against the dollar since the previous Tankan on April 1.